This is the second part in the series on Economic Survey 2014-15. The first part focussed on the State of the Economy. Here we will look at the state of public finance as outlined in this year’s Economic Survey.
The 2014-15 Budget set a fiscal deficit target of 4.1% of GDP. As you will know, fiscal deficit is the excess of expenditure over revenue and indicates the borrowings of the government to meet the budgetary outlays.
Revenue deficit was targeted at 2.9% of GDP in 2014-15.
Goods and Services Tax (GST)
GST is set to be introduced from 1st April 2016. The highlights of GST are:
- GST would be applicable on supply of goods or services as against the present concept of tax on the manufacture or on sale of goods or on provision of services.
- GST would be a destination-based tax as against the present concept of origin-based tax.
- It would be dual GST with the centre and the states simultaneously levying it on a common base.
- An integrated GST (IGST) would be levied on inter-state supply of goods and services but would be collected by the centre.
- GST would apply to all goods and services except alcohol for human consumption.
- The rates for central, state and inter-state GST would be recommended by the GST Council (GSTC) which will be chaired by the Union Finance minister and will have state finance ministers as its members.
- A common threshold exemption would apply to both GST and SGST. Taxpayers with a turnover below it would be exempt from GST.
Trend in Subsidies
Subsidies offered by the government in various sectors has been increasing for various reasons. Let’s look at the subsidies in various sectors of the economy as per 2014-15 budget estimates. All figures are in Rs Crores.
|Subsidy Head||2014-15 Budget Estimates|
|Major subsidies as % of GDP||1.95|
|Total subsidies as % of GDP||2.02|
Although petroleum subsidy has decreased owing to falling global crude prices, food subsidy which is the biggest of all subsidies is increasing every year owing to increasing minimum support prices (MSP) offered by the govt.
Revenue, Expenditure and Debt
Non-tax revenue mainly consists of interest and dividend receipts and the receipts from services provided by the central govt. After remaining at around 1.4% of GDP in 2011-12 and 2012-13, non-tax revenue was at 1.8% of GDP in 2013-14 and the Budget 2014-15 sought to maintain it around 1.7% of GDP.
Non-plan expenditure constituted around 68% of total expenditure in 2014-15 Budget Estimates (BE) which is 3 percentage points less than the levels of 2013-14. Within capital non-plan expenditure, it is defence expenditure which had the maximum share.
The total outstanding liabilities of the central govt. were 55.87 lakh crore, accounting for 49.2% of GDP, comprising of 39% public debt and 10.2% other liabilities.
Of total public debt, internal debt constituted 95.9% and the remaining was external debt. Total outstanding liabilities were estimated as 62.22 lakh crores in BE 2014-15.
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