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The government is confident of meeting the fiscal deficit target of 3.5 per cent of the gross domestic product in 2016-17, but officials said it might have to stretch its resources to do so.
Officials said the Centre would have to be disciplined in its spending for the rest of the year in light of the Seventh Pay Commission outgo, the capital expenditure burden, disappointing proceeds from spectrum sales and cautious optimism on disinvestment.
Economists said cuts in capital spending would be precarious when the public sector was carrying the burden of spending in infrastructure.
“We have seen the spectrum proceeds. We have seen trends in revenue and in disinvestment. The overall targets will be met eventually, but it will be a tight squeeze,” an official said. The Centre’s target from spectrum auctions for 2016-17 was Rs 64,000 crore but it will receive Rs 32,000 crore. Part of the shortfall could be filled in by Rs 15,000 crore raised in the recent black money disclosure scheme.
“The proceeds from the black money disclosure scheme are not enough in the larger scheme of things. We can surely rule out additional spending,” said a second official.
Direct taxes have been tepid in the first half of the year, but officials said since taxes were backloaded, both indirect and direct tax numbers would show improvement. The Centre’s plans for the year hinge on dividends from state-owned companies and banks, and disinvestment. The government has raised Rs 21,000 crore through stake sales and buybacks in April-September, raising expectations for the rest of 2016-17.
The disinvestment target for the year is Rs 56,500 crore. Of this, Rs 36,000 crore is expected from minority stake sales and buybacks, and Rs 20,500 crore from strategic sales. The Centre’s biggest outgo so far this year has been Rs 85,000 crore on hikes recommended by the Seventh Pay Commission. The Centre’s capital spending push has also continued for a second successive year, as shown in the accompanying table.
Finance Minister Arun Jaitley sought Parliament’s approval in the first supplementary demand for grants for extra spending of Rs 1.03 lakh crore. There were reports the next supplementary demand for grants would seek approval for an additional Rs 60,000 crore spending in infrastructure. These reports have been ruled out by officials.
“Previous governments have tended to cut back on discretionary expenditure, which is normally capital expenditure,” Madan Sabnavis, chief economist, Care Ratings, said in a research note earlier this month. “The private investment cycle has not yet commenced and there is a lot of dependence on the government to keep the investment tempo stable.”
The report stated the Centre had in 2015-16 cut spending on defence services by Rs 13,000 crore, railways by Rs 8,000 crore, and roads by Rs 5,500 crore.
Officials said the Centre would have to be disciplined in its spending for the rest of the year in light of the Seventh Pay Commission outgo, the capital expenditure burden, disappointing proceeds from spectrum sales and cautious optimism on disinvestment.
Economists said cuts in capital spending would be precarious when the public sector was carrying the burden of spending in infrastructure.
“We have seen the spectrum proceeds. We have seen trends in revenue and in disinvestment. The overall targets will be met eventually, but it will be a tight squeeze,” an official said. The Centre’s target from spectrum auctions for 2016-17 was Rs 64,000 crore but it will receive Rs 32,000 crore. Part of the shortfall could be filled in by Rs 15,000 crore raised in the recent black money disclosure scheme.
“The proceeds from the black money disclosure scheme are not enough in the larger scheme of things. We can surely rule out additional spending,” said a second official.
Direct taxes have been tepid in the first half of the year, but officials said since taxes were backloaded, both indirect and direct tax numbers would show improvement. The Centre’s plans for the year hinge on dividends from state-owned companies and banks, and disinvestment. The government has raised Rs 21,000 crore through stake sales and buybacks in April-September, raising expectations for the rest of 2016-17.
The disinvestment target for the year is Rs 56,500 crore. Of this, Rs 36,000 crore is expected from minority stake sales and buybacks, and Rs 20,500 crore from strategic sales. The Centre’s biggest outgo so far this year has been Rs 85,000 crore on hikes recommended by the Seventh Pay Commission. The Centre’s capital spending push has also continued for a second successive year, as shown in the accompanying table.
Finance Minister Arun Jaitley sought Parliament’s approval in the first supplementary demand for grants for extra spending of Rs 1.03 lakh crore. There were reports the next supplementary demand for grants would seek approval for an additional Rs 60,000 crore spending in infrastructure. These reports have been ruled out by officials.
“Previous governments have tended to cut back on discretionary expenditure, which is normally capital expenditure,” Madan Sabnavis, chief economist, Care Ratings, said in a research note earlier this month. “The private investment cycle has not yet commenced and there is a lot of dependence on the government to keep the investment tempo stable.”
The report stated the Centre had in 2015-16 cut spending on defence services by Rs 13,000 crore, railways by Rs 8,000 crore, and roads by Rs 5,500 crore.
