The government further said the gross tax revenue as a per cent of GDP is expected to increase to 12.1 per cent of GDP in 2019-20 and stabilise at that level in 2020-21 before climbing up to a level of 12.2 per cent of GDP.
Using the debt-to-GDP ratio as a fiscal anchor aligns with efforts to promote fiscal transparency through proper disclosure of off-budget borrowings.
The government has utilised 'escape clause' under the FRBM Act which provides it leeway for relaxation of fiscal deficit roadmap during time of stress.
There are various estimates of India's debt to GDP ratio, but the consensus is that that it would be over 80 per cent at the end of the current fiscal year.
'But can it afford to present a scenario within the existing legal framework of fiscal consolidation?', asks A K Bhattacharya.
'The finance ministry's decision to accept the deficit target of 4.5 per cent in 2025-2026 appears to have emanated from its endorsement of the Finance Commission's view that the Indian economy will continue to remain impacted by the pandemic, adversely undermining its growth potential,' notes A K Bhattacharya.
IThe fiscal deficit target for 2020-2021 was originally set at 3.5 per cent of GDP. But the government's revenues have collapsed and its expenditure burden will only increase over the Budget estimates.' With the government having already planned for an additional borrowing of over Rs 4 trillion, the fiscal deficit for the current year would be much higher than the Budget estimate, notes A K Bhattacharya.
If the government cuts wasteful expenditure as it is trying now, the deficit would at most fall to 8 per cent, not less than that.
A well-established tax system would have a predictable buoyancy - how fast the collections grow as a proportion to the growth of the economy. But that is not the case with GST. It is still undergoing substantial changes as the government responds to structural as well as administrative glitches.
