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Last updated: 05 Jun, 2018  

Up.9.Thmb.jpg Fiscal deficit, GDP data: Is it a turnaround

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Bikky Khosla | 05 Jun, 2018

In a big relief, the government has broadly met its fiscal deficit target of 3.5 percent for the financial year 2017-18. According to provisional data released by the Controller General of Accounts (CGA), fiscal deficit for the period stood at 3.53 percent of the country's Gross Domestic Product. It reached Rs 5.91 lakh crore as against the revised estimates of Rs 5.94 lakh crore. In budget 2018-19, the target was revised to 3.5 percent from 3.2 percent, and now it is a pleasant surprise that the revised target is almost achieved.

Fiscal deficit for the April-February period had stood at 120 percent of the revised estimate. Similarly, revenue deficit and primary deficit for the period had stood at 119 percent and 414 percent of the revised FY18 target. There was pressure on the government due to implementation of the Goods and Services Tax. In the background of this, it looked like the government may not be able reach the deficit target even after the revision, but factors like rise direct tax, non-tax revenues, expenditure savings and disinvestment helped contain the deficit.

Meanwhile, India's Gross Domestic Product registered 7.7 percent growth during the January to March quarter, against China's 6.8 percent growth for the period, enabling the economy to again retain its position as the fastest growing major economy. This is the fastest pace of growth in seven quarters. This is again encouraging. Nobody anticipated such an extent of growth. However, for the whole fiscal year that ended March 31, growth slipped to 6.7 percent, down from 7.1 percent in 2016-17.

So, what explains the spike in fourth-quarter GDP growth? The government claims that the growth indicates turnaround in manufacturing and construction activity and pick up in private investments. The data shows a robust 9.1 percent growth in manufacturing, compared with 6.1 percent a year ago. The farm and services sectors also did well. However, a recent report pointed out that it was only "the hand of government" that lifted GDP growth. Additionally, exports and private consumption also disappointed. These aspects demand attention from government.

I invite your opinions.

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