A proactive policy action has helped the government prevent the fiscal slide and remain in fiscal consolidation mode in 2013-14, according to the Economic Survey 2013-14 released today.
Fiscal outcome was in line with the central government's medium term fiscal policy targets and this has been achieved despite the macro-economic challenges of growth slowdown, elevated levels of global crude oil prices, and slow growth of investment, the survey noted.
The fiscal deficit for 2013-14 has been contained at Rs508149 crore (provisional), which is 4.5 per cent of the GDP. The corresponding figure for 2012-13 was 4.9 per cent. The primary deficit would be 1.2 per cent of the GDP in 2013-14 while the revenue deficit is 3.2 per cent.
The revenue receipts in 2013-14 is estimated to be Rs10,15,279 crore, 8.9 per cent of the GDP. The gross tax revenue in 2013-14 is provisionally estimated at Rs11,33,832 crore which is 10 per cent of the GDP. The gross tax revenue has shown a 0.2 per cent decline in terms of GDP over the previous year. The shortfall is attributed to the poor performance of indirect taxes.
The total indirect tax collection for 2013-14 has been Rs4,96,231 crore, while it was Rs4,73,792 crore in 2012-13. The decline in expected revenue from indirect taxes was mainly on account of general economic slowdown, reduction in duty rates (both customs and excise), lower volume of imports of dutiable goods, and various exemptions.
The direct tax collection for 2013-14 stood at Rs6,33,473 crore. The percentage of direct tax revenues as part of GDP stood at 5.6 per cent while indirect tax revenues constitute 4.4 per cent of GDP.
Non-tax revenue during the year 2013-14 has gone up to Rs1,99,233 crore, showing a significant increase of about 45 per cent compared to the previous year, mainly on account of dividends and profits and interest receipts.
Non-debt capital receipts, which include recoveries of loans, disinvestment receipts and miscellaneous receipts, decreased to Rs36,644 crore in as per revised estimates for 2013-14. The disinvestment programme has had limited success due to subdued market conditions and yielded Rs27,555 crore.
The total expenditure of the central government stood at Rs15,63,485 crore, about 13.1 per cent of GDP. Major subsidies went up to Rs 2,47,596 crore, 2.2 per cent of GDP. Interest payments at Rs3,77,502 crore formed 3.3 per cent of GDP.
With the shortfall in tax revenues and disinvestment receipts, and higher than budgeted subsidies, interest, and pension payments, fiscal consolidation was mainly achieved through a reduction in grants for creation of capital assets and capital expenditure.
To achieve the debt policy of maintaining stable, sustainable, prudent and market oriented active debt management, the government conducted buyback and switching of securities which resulted in reduction in market borrowings by Rs15,000 crore for 2013-14 to Rs 4,68,902 crore.
To broaden the investor base and develop a competitive market, the government introduced inflation indexed bonds. A positive change in the debt profile of the country has been the reduction of total outstanding liabilities of the central and state governments, as a proportion of GDP which now stands at 49.4 per cent.
The liability-GDP ratio of the central government declined from 63.5 per cent in 2002-03 to 49.8 per cent in 2013-14 (RE), as the high nominal GDP growth offset both the new borrowing as well as the nominal interest payments creditors have demanded.
The survey says that despite the global and domestic challenges, the economy achieved its targeted fiscal consolidation in 2013-14, although this has been achieved by cutting expenditure (majorly plan /capital expenditure), which is unsustainable for an economy.
It says that addressing the risk of food, fertiliser and petroleum subsidies is critical. Another challenge lies in improving tax buoyancy, and overall shortfall in non-debt receipts could be contained with greater efforts at mobilisation and reforms.
''Fiscal consolidation remains imperative for the economy, both in the current context and the years to come with the emphasis on maintaining the quality of adjustment. It is better to achieve fiscal consolidation partly through a higher tax- GDP ratio than merely through reduction in the expenditure to GDP ratio, in view of the large unmet development needs.