expenditure was pegged at 1.4 per cent of GDP in 2019-20 BE. The budgetary expenditure on major subsidies including food, fertilizer and petroleum subsidies has shown a declining trend over the past years.

Also there here has been considerable restructuring and reclassification of Central sector and Centrally Sponsored Schemes in the recent years. Expenditures on salaries, pensions and interest payments are committed in nature and therefore have limited headroom for creation of additional fiscal space.

The quality of expenditure is captured by the share of capital expenditure in total expenditure. In the current scenario share of capital expenditure in total expenditure is envisaged to decline roughly by a percentage point in 2019-20 BE over 2018-19 PA. However, capital spending in 2019-20 BE is estimated to grow by 10 per cent over that of 2018-19. Major sectors apart from defence services that account for bulk of capital expenditure allocation include internal security, investments in Financial Institutions, assistance for metro projects, space technology and construction of Roads and Railways. Apart from budgetary spending, Extra Budgetary Resources (EBR) have also been mobilized to finance infrastructure investment since 2016-17. EBRs are those financial liabilities that are raised by public sector undertakings for which repayment of entire principal and interest is done from the Central Government Budget. Government proposes to raise EBR to the tune of 0.27 per cent of GDP. These EBRs are not taken into account while calculating the Fiscal Deficit. However, they are considered in the calculations of Government Debt.

## Transfer to States

The Fourteenth Finance Commission (FFC) for the award period 2015-20 had made far-reaching changes to strengthen fiscal federalism in the country. Consequently, States have obtained larger fund per their needs. Transfer of funds to States transfers as well as greater autonomy to utilise funds as comprises essentially of three components: share of States in Central taxes devolved to the States, Finance Commission Grants, and Centrally Sponsored Schemes (CSS), and other transfers. Till 2013- 14, funds for CSS were routed through two channels, the Consolidated Funds of the States and directly to the State implementing agencies. In 2014- 15, direct transfers to State implementing agencies were discontinued and all transfers to States including for the CSS were routed through the Consolidated Funds of the States. The Budget 2019-20 envisages an increase in expected grants and loan to States on account of higher requirements under compensation to States for revenue losses on roll out of GST, grants to rural and urban bodies and releases under Samagra Shiksha.

##### Fiscal outcome in 2019-20 (up to November 2019) vis-à-vis 2019-20 BE

Indian economy registered a sluggish growth during first half of 2019-20. A series of measures were introduced by the Government during the financial year to boost the economy, which are expected to have a substantial direct and indirect impact on the fiscal performance of the economy. Revenue receipts have grown at a much higher pace during the current financial over the corresponding period last year. Considerable growth in Non-Tax revenue, especially dividends and profits, which offset the low growth in Net Tax revenue, underlie it. Dividends and profits led by transfer from RBI grew at roughly three times over the same period last year. Centre's tax collection is likely to fall short of its estimate by 1.2 per cent of GDP in 2019 -20.This is primarily owing to low growth in GTR as compared to the previous financial year. Within direct