Survey pins hope on GST revenue collections to rein in fiscal deficit

The Economic Survey for 2019-20 released on Friday said that drop in fixed investment by households from 14.3 per cent to 10.5 per cent explains most of the decline in overall fixed investment between 2009-14 and 2014-19.

Fixed investment in the public sector marginally decreased from 7.2 per cent of GDP to 7.1 per cent during the two periods.

"However, the stagnation in private corporate investment at about 11.5 per cent of GDP between 2011-12 to 2017-18 has a critical role to play in explaining the slowing cycle of growth and, in particular, the recent deceleration of GDP and consumption."

In 2019-20, the Centre's fiscal deficit was budgeted at Rs 7.04 lakh crore (3.3 per cent of GDP) as compared to Rs 6.49 lakh crore (3.4 per cent of GDP) in 2018-19.

The Good and Services Tax (GST) collections -- the biggest component of indirect taxes -- grew by 4.1 per cent for the Centre from April to November 2019. However, the uptick in growth of cumulative GST collections for the Centre started in October 2019 and has sustained its momentum in November to December 2019 as well.

The growth of bank credit which was picking up in the first half of 2018-19 started decelerating in the second half of 2018-19 and further in the first half of 2019-20. The deceleration was witnessed across all major segments of non-food credit, save personal loans which continued to grow at a steady and robust pace.

The survey said that deceleration in credit growth was mostly in the services sector. Credit growth to the industry also witnessed a significant decline in recent months, both for the MSME sector as well as large industries. Agriculture and allied activities benefitted from a higher growth of credit.

Despite the muted growth of services exports, the trade balance on the services accounts continued to be positive in 2019-20. The trade surplus on services account has been estimated at 40.5 billion dollars in the first half of 2019-20 as compared to 38.9 billion dollars in 2018-19.

Lower current account deficit (CAD) reflects reduced external indebtedness of the country, making domestic economic policy increasingly independent of external influence.

The CAD, which was 2.1 per cent of GDP in 2018-19, has improved to 1.5 per cent in H1 of 2019-20 on the back of significant reduction in the trade deficit. In the first eight months of 2019-20, both gross and net FDI flows to the country have been more than the flows received in the corresponding period of 2018-19.

Net FPI inflow in the first half of 2019-20 was also robust at 7.3 billion dollars as against an outflow of 7.9 billion dollars in the first half of 2018-19.

( With inputs from ANI )