Proactive policy action helped government prevent the fiscal slide and remain in fiscal consolidation mode in 2013-14. According to the Economic Survey 2013-14 released here today, the fiscal outcome of the central government in 2013-14 was in line with the targets set as per the Medium Term fiscal policy statements and was achieved despite the macro- economic challenges of growth slowdown, elevated levels of global crude oil prices, and slow growth of investment. The fiscal deficit for 2013-14 has been contained at ₹ 508149 crore (provisional) which is 4.5% of the GDP. The corresponding figure for 2012-13 was 4.9%. The primary deficit would be 1.2% of the GDP in 2013-14 while the revenue deficit is 3.2%.

The revenue receipts in 2013-14 would be ₹ 1015279 crore, 8.9% of the GDP. The gross tax revenue in 2013-14 are provisionally estimated to be ₹ 1133832 crore which is 10% of the GDP. The gross tax revenue has shown a decrease of 0.2% in terms of GDP over the previous year. The shortfall is mainly due to the poor performance of indirect taxes. The total indirect tax collection for 2013-14 has been ₹ 496231 crore, while it was ₹ 473792 crore in 2012-13. The decline in expected revenue from indirect taxes was mainly on account of general economic slowdown, reduction in duty rates (both customs and excise), lower volume of imports of dutiable goods, and various exemptions. The direct tax collection for 2013-14 has been ₹ 633473 crore. The percentage of direct tax revenues as part of GDP is 5.6% while indirect tax revenues constitute 4.4% of the GDP.

The non-tax revenue during the year 2013-14 has gone up to ₹ 199233 crore, showing a significant increase of about 45% compared to the previous year, chiefly on account of dividends and profits and interest receipts. Non-debt capital receipts which include recoveries of loans, disinvestment receipts and miscellaneous receipts decreased to ₹ 36644 crore in RE 2013-14. The disinvestment programme has had limited success due to subdued market conditions and yielded ₹ 27555 crore.

The total expenditure of the central government was ₹ 1563485 crore which constituted 13.1% of the GDP. The major subsidies went up to ₹ 247596 crore, 2.2% of the GDP. The interest payments were ₹ 377502 crore, 3.3% of GDP.

With the shortfall in tax revenues and disinvestment receipts, and higher than budgeted subsidies, interest, and pension payments, the fiscal consolidation was mainly achieved through a reduction in grants for creation of capital assets and capital expenditure.

To achieve the debt policy of maintaining stable, sustainable, prudent and market oriented active debt management, the government conducted buyback and switching of securities which resulted in reduction in market borrowings by ₹ 15000 crore for 2013-14 to ₹ 468902 crore. To broaden the investor base and develop a competitive market, the government introduced inflation indexed bonds. A positive change in the debt profile of the country has been the reduction of total outstanding liabilities of the central and state government, as a proportion of GDP which now stands at 49.4%. India`s central government liabilities-GDP ratio declined from 63.5 per cent in 2002-03 to 49.8 per cent in 2013-14 (RE), because the high nominal GDP growth offset both the new borrowing as well as the nominal interest payments, creditors have demanded.

Economic Survey says that despite the global and domestic challenges, the economy achieved its targeted fiscal consolidation in 2013-14 but this was done by cutting expenditure (majorly plan /capital expenditure) which is unsustainable for an economy. It says that addressing the risk of food, fertilizer and petroleum subsidies is critical. Another challenge lies in improving tax buoyancy, and overall shortfall in non-debt receipts could be contained with greater efforts at mobilisation and reforms. Fiscal consolidation remains imperative for the economy, both in the current context and the years to come with the emphasis on maintaining the quality of adjustment. It is better to achieve fiscal consolidation partly through a higher tax- GDP ratio than merely through reduction in the expenditure to GDP ratio, in view of the large unmet development needs.

Fiscal consolidation remains imperative; deficit containment achieved via expenditure compression and emphasis on tax mobilisation. Fiscal consolidation is the central policy imperative, with the central government achieving its medium term fiscal targets for 2013 14 through containment of the fiscal and primary deficits, strengthened revenue mobilisation and active debt management measures such as buybacks, switching and inflation indexed bonds, while relying substantially on compression of capital and plan expenditure rather than sustained revenue enhancement.