SBI's assertion comes at a time when many economists fear that the government may have to compromise on its fiscal deficit target for the fiscal.
By PTI | Updated:
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The report, however, noted that to manage the fiscal deficit, the government needs to cut expenditure substantially.
The government will meet its fiscal deficit target of 3.2 per cent of the gross domestic product, but it may come at a cost of over Rs 70,000-crore cut in capital expenditure, the State Bank of India has said.
A surging stock market would also help the government with higher-than-forecast proceeds from disinvestment, which could reduce the possibility of the state breaching the fiscal deficit target, SBI economist Soumya Kanti Ghosh wrote in a report.
“We estimate that government may cut around Rs 70,000 crore worth capital expenditure and Rs 38,000 crore from revenue expenditure compared to the budget estimate of FY18,'' Ghosh wrote. “With this, the fiscal deficit will stay at the same level.“
SBI's assertion comes at a time when many economists fear that the government may have to compromise on its fiscal deficit target for the fiscal. A slowdown in revenue growth due to disruptions caused by GST and a possible stimulus to boost demand are cited as reasons for the likely breach. In ad dition to expenditure cuts of Rs 70,000 crore, the government will also be able to meet the disinvestment target of Rs 72,500 crore, as . 60,000 crore has already been achieved.` “So, the fear of low disinvestment receipts is completely unwarranted,“ said the report. Even if the nominal growth rate of the economy ends up being lesser than forecast, it would not hurt the fiscal numbers due to the statistical lift growth received last year.
“Interestingly , the possibility of a lowerthan-estimated budgeted 11.8 per cent nominal growth will not translate to higher fiscal deficit as FY17 figures has already been revised upwards,“ it said. “We estimate even if the nominal growth declines significantly in FY18, fiscal deficit will be impacted by at most 10 basis points in upward direction.“
This is despite a likely drop in revenue receipts. SBI estimates that there may be still a shortfall of `. 1.1lakh crore in the revenue receipts. Out of this, around Rs 77,000-crore shortfall may be from tax revenue on account of reduction in excise duty in petroleum products, tax refunds under GST and revenue compensation to states for GST implementation.
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