Economic Survey pins hope on GST revenue to rein in fiscal deficit

New Delhi: The Economic Survey on Friday pinned its hope on uptick in growth of cumulative GST collections in October 2019 and November-December to contain fiscal deficit at the budgeted 3.3 per cent for FY2020. In 2019-20, Centre’s fiscal deficit was budgeted at Rs 7.04 lakh crore (3.3 per cent of GDP), as compared to Rs 6.49 lakh crore (3.4 per cent of GDP) in 2018-19.

Good and Services Tax (GST) collections, the biggest component of indirect taxes, grew by 4.1 per cent for the Centre during April-November 2019. However, the uptick in growth of cumulative GST collections for the Centre started in October 2019 and has sustained its momentum in November-December 2019 as well, the survey pointed out.

Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2019-20 in Parliament on Friday. The Survey also referred to an uptick in GDP growth in the second half of 2019-20. The government says that based on first Advance Estimates, India’s GDP growth for 2019-20 would be recorded at 5 per cent.

This suggests an uptick in GDP growth in second half of 2019-20. The survey states that the deceleration in GDP growth can be understood within the framework of a slowing cycle of growth. The financial sector has acted as a drag on the real sector.

The Survey said that the uptick in second half of 2019-20 would be mainly due to 10 positive factors like picking up of NIFTY for the first time this year, an upbeat secondary market, higher FDI flows, build-up of demand pressure, positive outlook for rural consumption, rebound of industrial activity, steady improvement in manufacturing, growth in merchandise exports, higher build-up of foreign exchange reserves and positive growth rate of GST revenue collection.

The Survey said on a net assessment of both the downside/upside risks, India’s GDP growth is expected to grow in the range of 6.0 to 6.5 per cent in 2020-21 and it asks the government to use its strong mandate to deliver expeditiously on reforms, which will enable the economy to strongly rebound in 2020-21.

Pointing out that the year 2019 was a difficult year for the global economy with world output estimated to grow at its slowest pace of 2.9 per cent since the global financial crisis of 2009, declining from a subdued 3.6 per cent in 2018 and 3.8 per cent in 2017.

Uncertainties, although declining, are still elevated due to protectionist tendencies of China and US and rising US-Iran geo-political tensions. Amidst a weak environment for global manufacturing, trade and demand, the Indian economy slowed down with GDP growth moderating to 4.8 per cent in first half of 2019-20, lower than 6.2 per cent in second half of 2018-19.

A sharp decline in real fixed investment induced by a sluggish growth of real consumption has weighed down GDP growth from second half of 2018-19 to first half of 2019-20.