MUMBAI, Feb 25: Government can achieve 3.5 per cent fiscal deficit target for 2016-17 from spectrum auction, says India Ratings ahead of the Union Budget amid concerns over the fiscal consolidation roadmap.
“There is a possibility of government making a windfall gain in its non-tax revenue account in case the spectrum sale takes place in FY17. This may help the government to adhere to 3.5 per cent fiscal deficit target of FY17, despite the burden of implementing seventh central pay commission award,” it said in a note.
Implementing the recommendations of 7th Pay Commission, suggesting 23 per cent hike in government staff’s salaries, is expected to dent the fiscal math by 0.6 per cent of GDP, which has resulted in high speculation over the strategy Finance Minister Arun Jaitley adopts in the Budget 2016-17, to be presented on Monday.
Some analysts are saying that the government may yet again opt for stretching the target, and pegging 3.8-3.9 per cent as the likely number.
The domestic ratings agency said that the Indian industry will also be keenly looking at the fiscal stance of the government, specifically for details on how additional spending can result in more capital investments.
It flagged that while capital expenditure increased in FY15’s revised estimates, it is still stuck at 1.7 per cent of the GDP and there is a need to push it to 2 per cent.
It said there is a likelihood of fiscal slippage in the current fiscal to 4.1 per cent (as against the targeted 3.9 per cent) due to lower than anticipated GDP growth. (PTI)
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