Amidst the many speculations of what the Union Budget 2017-18 would harbour in face of an extensive and haranguing demonetization exercise in the country and upcoming Assembly elections in five states, the Finance Minister Arun Jaitley has presented a balanced Budget with the insinuation of don t rock the boat theme, thus, barring the apprehensions of political parties on expectations of a populist budget by BJP for alluring votes in States elections. It was perhaps to reassure foreign investors on the stability of the Centre s finances and maintaining that India continues to be a bright spot in the world economy. Despite exceeding the expenditure targets on both the capital and revenue accounts, the government has met the fiscal deficit target of 3.5% for 2016-17. This has been due to buoyant tax revenues in both direct and indirect tax revenues for the 2nd year in succession. Compared to the Budget estimate of 10.8%, the tax-to-GDP ratio has risen to 11.3% of GDP.
The question now is, given the fact that the Finance Minister, Arun Jaitley will not have the benefit of falling oil prices and higher excise duties any more, will he be able to meet the revenue targets for the coming year. As always, disinvestment target of Rs.72,500 crore seems challenging, compared to receipts of Rs.45,500 crore in 2016-17. But demonetization exercise can rescue us here to some extent - the banking system is flush with funds from extra taxes payable under the Income Disclosure Scheme, ending of some of the liabilities of the Central Bank of India through demonetised currency which will not come back into the system, tax that could be recovered from income not declared in some of the deposits. Reconciling itself to a growth of 7-7.5% in the medium term, government maintains a greater focus on redistribution.