The Union finance ministry released the report of the task force on National Infrastructure Pipeline (NIP), which is aimed at making an investment of Rs 100 lakh crore in infrastructure projects over the next five years. Along with the details of proposed investment projects, the report also gives estimates of India’s nominal GDP from 2019-20 to 2024-25.
The Union finance ministry released the report of the task force on the National Infrastructure Pipeline
These estimates can give us an insight into the government’s expectations about economic growth in the medium term and the revenue situation for the current fiscal year. The summary findings: lower revenue (and tax revenue) in 2019-2020 but better-than-expected medium-term growth.
The shortfall in nominal GDP growth in 2019-20
The report puts nominal GDP in 2019-20 at Rs 205.37 lakh crore with an annual growth of 8% over Rs 190.1. lakh crore in 2018-19. The 2019-20 Budget had assumed the nominal GDP in the current fiscal year to be Rs 211 lakh crore assuming a growth rate of 12% over Rs 188 lakh crore as per revised estimates (RE) in 2018-19. The nominal GDP growth in the June and September quarter for the current fiscal year has been 8% and 6.5%.
Revenue shortfall
Even though the nominal GDP in 2018-19 was more than what assumed in the Budget. However, revenue collections did not meet their budgeted targets. According to the information given by the Controller General of Accounts (CGA) at the finance ministry, provisional net revenue (to Centre) collection in 2018-19 was Rs 13.61 lakh crore against RE figures of Rs 14.84 lakh crores given in the 2019-20 Budget. This gives a tax buoyancy figure – change in tax revenue per unit change in nominal GDP – of 0.53 in 2018-19.
If a similar level of tax buoyancy assumed for 2019-20, then the center’s net tax revenue expected to Rs 13.72 lakh crore. However, only 83% of the Rs 16.49 lakh crore figure given in the Budget Estimates of 2019-20. Given the fact that the Centre has slashed corporate tax rates this year, it is likely that the tax buoyancy will be lower than what it was last year.
Medium-term growth
A comparison of the nominal GDP forecasts given in the report with the International Monetary Fund’s (IMF) latest World Economic Outlook (WEO) projections. Also, which released in October last year, raises an interesting question. The IMF gives projections for India’s nominal and real GDP until 2024-25, the same period for which the report has given its estimates.
A comparison of the two shows an interesting pattern. While the government’s nominal GDP projections are lower than the IMF’s for the current and next financial year, they paint a better picture going ahead. To be sure, there is not much difference in the nominal GDP figures for 2024-25 in both the IMF (Rs 361 lakh crore) and government’s (Rs 365 lakh crore) estimates.