Lower revenue still a worrying factor

Sanjeev Sharma

Tribune News Service

New Delhi, December 19

While patting itself on the back for a turnaround in economic fundamentals — after the new government took over — which will lead to a GDP growth rate of 5.5 per cent this fiscal, the Mid-Year Economic Review of the Finance Ministry has cautioned that lower revenue collections and legacy expenditure pose a risk to fiscal numbers. It has advocated higher public spending in infrastructure.

“Investment is yet to pick up significantly. But on the upside, inflation has come down dramatically. The year (2014-15) could end with growth around 5.5 per cent,” the review tabled in Parliament said. The mid-year economic analysis prepared by Chief Economic Adviser Arvind Subramanian said that there has been a striking turnaround in India’s macro-economy and investor sentiment since the government took over that was reflected in lower inflation, a lower current account deficit, surging capital inflows and stock market valuations and the bottoming out of the growth deceleration seen for nearly three years.

“India is, and is perceived as, one of the sparks of the global economy. Underlying this change is the election of a new government with a relatively unencumbered political mandate for decisive economic change,” it said.

The review notes that the government is firmly committed to meeting its fiscal deficit target of 4.1 per cent for this year. However, it has pointed out challenges, including the economy growing slower than expected affecting revenue growth, the optimistic revenue projections in the budget not having materialised and the legacy of past expenditures weighing on the budget.