Budget 2018: Important measures required to return to fiscal reforms path

The fiscal deficit for 2017-18 is 3.5% of GDP, 0.3% higher than presented in last year's budget

The government has not been able to adhere to its fiscal deficit targets for 2017-18. This was not unexpected. The bond markets had factored in fiscal slippage resulting in a rise in bond yields by 110 basis points over the last four months. Following the presentation of the Budget, despite the fiscal slippage, bond yields have risen marginally—the fiscal slippage was not as bad as markets feared.

I will focus on analysing why the slippage occurred. The fiscal deficit (FD) for 2017-18 is 3.5 per cent of GDP, 0.3 per cent higher than presented in last year’s budget. The revenue