Continuing fiscal challenges a risk to growth: Eco Survey

New Delhi, Jan 31 (SocialNews.XYZ) Even as it has indicated towards a recovery of GDP growth in next fiscal, the Economic Survey has thrown enough pointers to suggest that a full scale recovery may not be swift and growth would follow a bell curve moving up the ladder in small paces.

The Survey, which gives the report card of the Indian economy, has said that through GDP growth rate may pick up from 5 per cent this year to about 6-6.5 per cent in the next fiscal, the year 2020-21 would continue to pose challenges on the fiscal front as revenue collections would slide. This is expected to provide little fiscal room to the government to pump prime the economy through increased expenditure.

Moreover, the recommendations of the 15th Finance Commission especially on tax devolution would have implications for central government finances and put a check on its ability to spend more.

The Survey flagged that the problem for the Indian economy was not just domestic as the outlook for global growth also persists to be weak, with escalated trade tensions adding to the risk.

"In order to boost the sluggish demand and consumer sentiments, counter-cyclical fiscal policy may have to be adopted to create additional fiscal headroom," the Survey suggested.

During the first eight months of 2019-20, the indirect tax collections have been muted. Therefore, revenue buoyancy of GST would be key to the resource position of both Central and State Governments.

The Survey said that on the expenditure side, rationalisation of subsidies especially food subsidy could be an important tool for expanding the headroom for fiscal manoeuvre.

The survey also said that the geopolitical situation unfolding in West Asia is likely to have implications for oil prices and thereby on the petroleum subsidy, apart from having implications for current account balance.

Source: IANS