3.2% fiscal deficit is possible: SBI Report

“There are doomsday predictions currently that government is going to have a big revenue slippage in 2017-18 which may impact the headline fiscal deficit numbers. 

However, such projections flunk the test of logical reasoning and are grossly misconstrued,” the report said. According to estimates by SBI’s economic research department, while there could be a shortfall of Rs 1.1 lakh crore in the revenue receipts, disinvestments receipts worth Rs 72,500 crore and expenditure cuts are likely to offset the impact. 

“We estimate that the government may cut about Rs 70,000 crore from the capital expenditure,” the report said. However, it noted that budgeted disinvestment receipts are on track to realising Rs 72,500 crore. “At current trends, it is likely that for the first time after fiscal 2009-10 that disinvestment target is likely to be achieved,” it noted, adding even if the nominal growth declines significantly in 2017-18, fiscal deficit would be impacted by at most 10 basis points in upward direction. 

Further, the report observed that the government has accumulated a total of Rs 40,491 crore in the National Small Savings Fund during the first five months of this fiscal. 

“It could thus receive Rs 1 lakh crore in small savings in FY18, and would be able to do a buyback of Rs 75,000 crore which was contingent upon that.” 

“This, in turn, implies that the government would be able to meet its net borrowing target of Rs 3.48 lakh crore,” it added. Out of the total estimated shortfall of Rs 1.1 lakh crore in the revenue receipts, 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. The non-tax revenue may decline by Rs 38,000 crore because of lower spectrum proceeds among others, it said.