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The government is on track to meet its fiscal deficit target of 5.9% of GDP for this year, the Department of Economic Affairs (DEA) has said, noting that revenues are buoyant, and the “steep, rapid decline in oil prices” has addressed an important source of potential impact on public finances.
“Continued buoyancy in revenue collections supported by prudent expenditure management has enabled the fiscal deficit to be contained within 40% of the Budget Estimate during the first half of the year. The government’s emphasis on capital expenditure has continued during the year as well, imparting an impetus to private investment,” the DEA said.
The DEA’s remarks are part of a macroeconomic overview presented in its monthly summary report for October, that was issued on December 22. Terming private demand a strong growth driver this year, the DEA said that the festive season has further strengthened consumption demand.
“While accumulated savings and declining rates of unemployment constitute the underlying strength of consumption demand, the wealth effect emanating from growing capitalisation of equity markets and rising real estate prices may have also strengthened consumption,” it said.
The supply-side economy so far this year validates the confidence reposed by global rating agencies in India’s economic strength, it added, stressing that the economy has been remarkably resilient amid a global slowdown.
“The latest estimates indicate robust output of major Kharif crops. Rabi sowing has also shown healthy progress, fostering expectations of a strong Rabi output. Rural demand has sustained sequential momentum during the second quarter as incomes from food grain production have been stable and inflationary pressures have been moderate,” the overview noted.
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