New Delhi: Amid expectations of a stimulus package to kick-start the economy, the finance ministry has sought proposals from departments and ministries for the second batch of supplementary demands for grants for 2017-18 to be presented before Parliament during its winter session in November.
Government departments and ministries must submit the proposals by 31 October.
The finance ministry has started the budget-making exercise for the fiscal year starting 1 April with the release of the budget circular containing the timelines for submission of information by various departments. Ministries and departments have to submit tentative budget estimates for fiscal 2019 by 30 September.
Departments have been asked to try and meet their additional funding requirements through internal savings first and seek the minimum additional requirement needed unless they have been specifically asked to move supplementary demands for grants. Finance minister Arun Jaitley last week said his ministry would soon announce measures to revive decelerating economic growth.
The residual impact of the 8 November demonetization move and the 1 July implementation of the goods and services tax (GST) were seen as contributing factors. Current account deficit at a four-year high (2.4% of GDP in Q1 FY18) and rising retail inflation have further exacerbated the macroeconomic situation.
There has been speculation that the revival package could include incentives for exporters, fiscal sops and investments in large infrastructure projects. Reviving economic growth and creating more jobs, promises that the ruling Bharatiya Janata Party (BJP) made to come to power in 2014, are crucial as the party seeks re-election in 2019.
India Ratings Ltd, which revised its GDP projection downward for 2017-18 to 6.7% from 7.4% projected earlier on Wednesday, said the availability of fiscal space with the government for a stimulus package is questionable. It said the government is likely to face a shortfall in revenue in 2017-18 emanating from the non-tax revenue side.
“This will push the fiscal deficit by 26 basis points of GDP, meaning the fiscal deficit would escalate to 3.46% of GDP in FY18 (from budgeted 3.2% of GDP). The likely fiscal stimulus which the government is contemplating would push the fiscal deficit further," it said.
The finance ministry on 27 July sought Parliament’s approval for an additional expenditure of Rs11,166 crore for 2017-18 as part of the first batch of supplementary demands for grants. Of the additional expenditure, the net cash outgo is Rs10,647.45 crore while the rest will be met through savings or enhanced receipts by government departments.
The Asian Development Bank (ADB) that pared down its GDP forecast to 7% from 7.4% projected earlier for 2017-18 on Tuesday said fiscal stimulus “is less likely with the government having exhausted 92.4% of the full fiscal year deficit to cover slippage in non-tax revenue due to slow progress in achieving disinvestment targets. Meanwhile, the scope for cutting back expenditure is limited," it said.