GST set to bring India’s tax-GDP ratio close to 12 pc; sharp jump in welfare spending in next 2 years
India's tax-GDP (gross domestic product) ratio will inch close to 12 percent while expenditure on centrally sponsored schemes will likely rise 23.6 percent to Rs 4.65 lakh crore by 2019-20, as the Narendra Modi-led government gears up for the general election after completing a five-year term.
“Going forward in the years 2018-19 and 2019-20, the gains from expansion of the tax base due to the introduction of GST and the increased surveillance post-demonetisation will ensure that tax-GDP ratio will increase by 30 bps in each of these fiscals,” the Medium Term Expenditure Statement (MTEF) said.
The tax-GDP ratio is projected to reach 11.6 percent in 2018-19 and 11.9 percent in 2019-20 respectively, the according to the MTEF report tabled in the Lok Sabha today.
The report further said that any shocks to tax collections due to the introduction of Goods and Services Tax (GST) from July 1 will be absorbed in 2017-18.
“Hence, the tax-GDP ratio (in 2017-18) will remain at the level of 2016-17,” the report said.
The MTEF Statement provides medium term perspective to the fiscal management and furthers the government’s focus towards fiscal consolidation. It is a three-year rolling target for the expenditure indicators with specification of certain assumptions and risks involved.
The objective of the MTEF is to provide closer integration between budget and the FRBM (Fiscal Responsibility and Budget Management) Statements.
Total expenditure of the government will touch Rs 25.95 lakh crore in 2019-20, up from Rs 21.46 lakh in the current financial year.
Defence, which constitutes 28 percent of the government's total capital expenditure is projected to rise 22 percent to Rs 1.11 lakh crore, while transport is expected to witness a jump of 32.2 percent to 1.47 lakh crore in 2019-20 as compared with the current fiscal.
Among subsidies, the government plans to spend 60 percent on food, with its subsidy touching Rs 2 lakh crore in the next two years, up 37.6 percent as compared with the current year's budgeted estimate of Rs 1.45 lakh crore. On the contrary, the subsidy on fuel will decline 28 percent by 2018-19 to Rs 18,000 crore.
“The subsidy bill as a percent of GDP is budgeted to be 1.4 percent in 2017-18. This ratio has been projected to decrease by 0.1 percentage point over the course of the next two years. The ultimate aim of the government is to eliminate the subsidy on LPG Cylinders by end March 2018. After the successful implementation of direct benefit transfer for LPG the Government is now focused on reducing kerosene subsidies,” the report said.
Centrally sponsored schemes such as Mahatma Gandhi National Rural Employment Guarantee Programme, the government has projected an increase in expenditure by a fourth to Rs 60,000 crore in 2019-20. Deen Dayal Upadhaya Gram Jyoti Yojna will attract Rs 10,000 crore in 2019-20, Rs 6,300 crore in 2018-19, from an allocation of Rs 4,814 crore in the current fiscal.
The Centre will spend Rs 29,000 crore for Sarva Siksha Abhiyaan programme, up 23.4 percent and Rs 16,877 crore for Swacch Bharat Mission, up 21 percent from 2017-18.The government also plans to double its spending on housing scheme Pradhan Mantri Awas Yojana to Rs 13,000 crore in the next two years.