The government expects to meet this year's fiscal deficit target through savings, rollover of subsidies and higher direct tax collections, top government officials told CNBC-TV18.
The Narendra Modi government is betting on expenditure savings of Rs 20,000 crore to Rs 25,000 crore and expects direct tax collections to be more than the budgeted target of Rs 11.5 lakh crore, which would help it meet the fiscal deficit target of 3.3 percent of gross domestic product (GDP) for 2018-19, said officials on condition of anonymity.
The government is also planning to defer oil companies' demand for additional LPG and kerosene subsidy to March 2019 while demand for additional Mahatma Gandhi National Rural Employment Gurantee Act (MNREGA) allocation is likely to be met by internal accruals, said the officials.
Talking on additional subsidies, a senior government official said, “Rs 10,000 crore subsidy payment in second supplementary is something the government cannot afford currently as it has yet to get a fix on the revenue stream. This payment is most likely to happen in March now.”
The fiscal deficit or gap between expenditure and revenue was Rs 6.48 lakh crore or 103.9 percent of Budget Estimate (BE) during April-October of the current financial year. At end of October 2017-18, the deficit was 96.1 percent of the BE.
The government has budgeted to cut fiscal deficit to 3.3 percent of GDP in 2018-19 from 3.53 percent in the previous financial year.
There is concern that the government will miss the fiscal deficit target due to a shortfall in revenues and lower-than-targeted disinvestment proceeds, India Ratings and Research said last Monday.
Further, the centre is worried about the FY19 GST target, "We are well below the strike rate on GST collections," top government officials told CNBC-TV18, with the revenue trend showing a month on month gap of Rs 6,000-7,000 crore.
At this rate, the government maybe staring at a GST shortfall of Rs 72,000 to Rs 84,000 crore by the year end.
However, the centre may use the option of retaining 50 percent of the compensation cess collected this fiscal. As of October end, approximately Rs 55,000 crore was collected in the compensation cess pool and legally centre and states can divide this amount equally, at any point in time during the financial, if required.
In fact, the budget target for the compensation cess is Rs 90,000 crore for FY19. The advantage the centre enjoys with the compensation cess is after the 50:50 sharing with the states, further 42 percent devolution by the centre to the states is not required, as it’s a cess and not a tax collection.