Union Budget 2017-2018 Review: ICRA

In its BE for FY2017, the GoI had pegged its fiscal deficit at Rs. 5.3 lakh crore (3.5% of GDP; based on the assumption that nominal GDP for FY2017 would be Rs. 150.7 lakh crore). The RE for FY2017 has indicated that the fiscal deficit would be higher than the BE by a mild Rs. 370.0 crore, while the nominal GDP for FY2017 has also been revised marginally to Rs. 150.8 lakh crore. As a result, the fiscal deficit remains unchanged at 3.5% of GDP in the RE for FY2017, in line with the budgeted target (refer Table 1 and Chart 1).The BE for FY2018 indicates a mild increase in the fiscal deficit in absolute terms, to Rs. 5.5 lakh crore. However, as a percentage of GDP, the fiscal deficit is estimated to correct to 3.2% in the BE for FY2018 (assuming nominal GDP of Rs. 168.5 lakh crore in FY2018) from 3.5% in the RE for FY2017, indicating continued fiscal consolidation. Notably, the latter is slightly higher than the recommendation of the NK Singh Committee and the rolling target of 3.0% of GDP that had been proposed in last year’s budget. The quality of the fiscal deficit is expected to remain largely unchanged, with the revenue deficit accounting for 58.8% of the total fiscal deficit in FY2018 BE.Fiscal situation as per FY2017 RE: At an absolute level, the fiscal deficit in FY2017 RE is marginally higher than the BE for FY2017, withhigher capital expenditure and lower non-debt capital receipts, largely offset by healthier-than-expected tax receipts.Disclaimer: The views and investment recommendations expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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