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Abstract
In 2016-17, the finances of states were budgeted to improve at the consolidated
level from the sharp deterioration in 2015-16 where the revised estimates (RE) of the gross fiscal deficit-gross domestic product (GFD-GDP) ratio breached the threshold of 3 per cent for the first time since 2004-05. The turnaround was premised on a surplus in the revenue account alongside a decline in loans and advances even as states planned for an increase in capital outlay so that fiscal consolidation is achieved through revenue augmentation rather than growth inhibiting expenditure reduction. Key to the sustainability of this strategy over the medium term is the legislative approval of the Goods and Services Tax (GST) Act in September 2016 and its subsequent enactment into law with likely implementation from July 1, 2017. The GST is widely regarded as a critical structural reform with broader ramifications in terms of growth, inflation, fiscal viability and external competitiveness. Accordingly, this year’s report adopts the GST as its theme.[1]
[1] All information on GST related policy developments are as of March 31, 2017