This chapter explains fiscal developments in India during the year 2019-20. MTFP Statement presented with the Budget 2019-20, pegged the fiscal deficit target for 2019-20 at 3.3 per cent of GDP as against 3.4 per cent of GDP in 2018-19 Provisional Actuals (PA)

##### Fiscal Developments: Centre

#### Revenues in Receipts Revenues in Receipts

Central government receipts can broadly be divided into Non-debt and debt receipts. The Budget 2019- 20 targeted a high growth in Non-debt receipts of the Central Government, which was driven by high expected growth in Net Tax revenue and Non-Tax revenue.

###### Tax Revenue

Budget 2019-20 estimated the Gross Tax Revenue (GTR) to be 11.7 per cent of GDP. This is an improvement of 18.3 per cent over 2018-19 PA. The direct taxes, comprising mainly of corporate and personal income tax, constitute around 54 per cent of GTR. The receipts from corporate and personal income tax have improved over the last few years. Better tax administration, widening of TDS carried over the years, anti-tax evasion measures and increase in effective tax payers base have contributed to direct tax buoyancy. Widening of tax base due to increase in the number of indirect tax filers in the GST regime has also led to improved tax buoyancy.

###### Non-Tax Revenue

Non-Tax revenue comprises mainly of interest receipts on loans to States and external grants. The Budget 2019-20 aimed to raise Non-Tax revenue amounting to 1.5 per cent of the GDP, 0.3 percentage points more than that in 2018-19 PA. Most of it came from dividends and profits especially surplus transferred by RBI.

#### Non-debt Capital receipts

Non-debt Capital receipts mainly consist of recovery of loans and advances, and disinvestment Non-debt Capital receipts receipts. Over the last few years, the contribution of have improved in the total pool of Non-debt receipts. They have been estimated to around 0.6 per cent of GDP, in 2019-20 BE owing to an envisaged growth on account of disinvestment receipts that accrue to the government on sale of public sector enterprises owned by the government (including sale of strategic assets). Given the significant pipeline of deals that are in process, realizations are likely to accelerate.

### Trends in Expenditure

It is imperative for any developing economy to optimally allocate the available resources without compromising on the crucial developmental and macroeconomic goals. As India's tax to GDP ratio is low, Government faces the challenge of providing sufficient funds for investment and infrastructure expansion while staying within the bounds of fiscal prudence. Therefore, improving the composition and quality of expenditure becomes significant. The composition of government expenditure in the last few years reveals that expenditure on defence services, salaries, pensions, interest payments and major subsidies account for more than 60 per cent of total expenditure. Several initiatives have been undertaken by the Ministry of Defence to improve efficiency and utilization of defence expenditure, promote self-reliance, and encourage private sector participation in the defence sector.

Budgetary expenditure on subsidies has seen significant moderation through improved targeting. There is still headroom available for further rationalization of subsidies especially food subsidy. The expenditure on major subsidies, which is a significant component of non-committed revenue