The Union Finance Ministry has lodged a formal request in the Parliament seeking permission to spend an additional amount of Rs 85,315 crore in the ongoing financial year. A big part (about 70 percent) of the said amount will be spent on compensating states for losses in revenue caused in the early stages of the GST roll-out.
India had reportedly increased the fiscal deficit target for 2017/18 to 3.5 percent from earlier 3.2 percent of GDP, however, the extra spending is not expected to affect this revised target.
Union Minister Arjun Meghwal processed the list of Supplementary Demands that need Grants for FY18 by the Lok Sabha. The additional funds will be used to match the target estimates as revised in the budget. This will include giving Rs 62,000 crore to the states and union territories as compensation for the losses caused following the launch of GST last year. Rs 9,260 crore will be given to the armed forces as payments for the pension.
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Rs 15,065.65 crore of the remaining funds will be used to avail grants to various schemes for the aid and creation of capital assets.A total of Rs 9.06 lakh crore is expected to be spent on the various grants, of which over Rs 8.21 lakh crore would be matched by various ministries and departments.
As per the document provided by the finance ministry, the net cash to be drawn from the Centre’s exchequer would be Rs 85,315.30 crore.
In response to the demand made by the Finance Ministry, Aditi Nayar, principal economist at Icra, said, “A substantial part of the net cash outgo proposed under the Fourth Batch of Supplementary Demands for Grants, 2017-2018 appears to be technical in nature, led by the transfer of GST compensation cess receipts into the non-lapsable GST Compensation Fund in the public account. This is likely to be a contra entry, with no net impact on the revenue or the fiscal deficit.”
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She further added that there will definitely be an impact on the fiscal deficit target, but not more than Rs 24,000 crore. However, the government should still be concerned about the country’s fiscal deficit which stood at Rs 6.8 trillion in just ten months of FY18, as against to the revised target of Rs 5.9 trillion.
