Govt likely to meet fiscal deficit target of 3.5% of GDP in FY17: DBS

Government is expected to meet the fiscal deficit target of 3.5% of GDP in the current financial year, despite recent demonetisation move and potential delay in roll out of the Goods and Services Tax (GST), says a report. 

According to global financial services major, DBS fiscal consolidation is likely to stay on track next year despite the risk that it might slow down.

"Despite the recent demonetisation drive and potential delay in the roll out of the GST, the 2016-17 fiscal deficit target of 3.5% of gross domestic product (GDP) is likely to be met," DBS said in a research note.

Fiscal deficit, the gap between expenditure and revenue for the entire fiscal, has been pegged at Rs 5.33 lakh crore, or 3.5% of GDP, in 2016-17.

According to official figures, fiscal deficit touched Rs 4.58 lakh crore, or 85.8% of the budget estimate for the whole financial year, at the end of April-November.

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"Yet far in 2016-17, the fiscal math has disappointed. With four months still to go, April-November 2016 fiscal deficit is at 86%of the full-year goal," DBS said but added that "the risks of fiscal slippage are low".

The report noted that expenditure disbursements are apace, while revenues play catch-up. Moreover, revenues are likely to rise as seasonally strong months of December and March draw closer, it added.

"Until November 2016, most revenue sub-heads were running above their budgeted pace, especially indirect tax collections, while collections from Income Declaration Scheme (IDS) and dividends from the Reserve Bank of India (RBI) have also been helpful," DBS said.

Moreover, windfall tax gains are likely if the banknote ban initiative is successful in unearthing unaccountable money from the system, though most benefits are likely to be accrued in the medium-term.

Non-tax revenues from spectrum licenses and divestment receipts have been encouraging, but might miss targets, the report said.

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