Govt may stick to 3.5 per cent fiscal deficit target for FY17: Report

The central government is expected to stick to its fiscal deficit target of 3.5 per cent of GDP for 2016-17, despite lower-than-expected proceeds from disinvestment and spectrum auctions, according to a Standard Chartered report.

Moreover, the Centre is likely to adhere to its fiscal consolidation plan by restricting deficit around 3 per cent of GDP in FY2017-18, the global financial services major said.

“We expect the central government to stick to its 2016-17 fiscal deficit target of 3.5 per cent of GDP, despite shortfalls in terms of disinvestment/telecom spectrum auctions proceeds and higher expenditure on subsidies and salaries,” Standard Chartered said in a research note.

The report noted that the central government’s fiscal deficit target faces an additional burden of around 0.6 percentage point of GDP in FY2016-17 on higher salaries and a greater food subsidy burden, as well as shortfalls in telecom spectrum auction proceeds, corporate tax collection and disinvestment proceeds.

However, this burden, is likely to be offset by higher-than-budgeted revenue from indirect taxes, dividend collection and reallocation within revenue expenditure.

Standard Chartered expects net tax collection to be higher by around 0.3 percentage point of GDP.

Fiscal deficit, the gap between expenditure and revenue for the entire fiscal, has been pegged at Rs 5.33 lakh crore, or 3.5 per cent of GDP, in 2016-17.

According to official figures, fiscal deficit touched Rs 4.58 lakh crore, or 85.8 per cent of the budget estimate for the whole financial year, at the end of April-November.