Union Budget 2017-18 at a glance

Union Budget 2017-18 at a glance

The finance ministry estimated the union budget deficit at 3.2% of GDP in FY18 (Taurus: 3-3.3%), amidst expectations of relaxation in the fiscal consolidation goals. This is wider than the previous target of 3.0% of GDP set out in last year’s budget and in line with the recommendations of the FRCB. The goal of reducing the deficit to 3.0% of GDP has now been pushed to FY19. The Direct tax revenue is budgeted at Rs 9.8 lakh crore, showing an increase of 15.7% from the revised estimates of FY17 while the Indirect tax revenue growth is budgeted at 8.8%. Gross tax revenue is expected to grow by 12.2% in FY18. Personal income tax is budgeted to grow at an aggressive 25%, growth in excise duties is projected to slow to 5% after growing at 34.5% in FY17. Growth in service tax collections is expected to slow to 11.1%. The government is expecting a 9.1% growth in corporation taxes.

The government continued to show optimistic disinvestment targets with FY18 budgeted at ?72,500 cr while FY17 has been revised down to ?45,500 cr (?56,500 cr). The total dividend for FY18 is ?74,900 crores with no special dividend assumed on account of the currency liability extinguished (dividend pass on) on the account of demonetization. The government has budgeted for slower growth in expenditure. Total spending is budgeted to grow at 6.6% (12.7% of GDP) though the share of capital spending is at a high of 14.4%. Major subsidies will be increased by 3.3% to ?2.4 lakh crore. Gross borrowing for FY18BE comes in at ?5.8 lakh crore (Taurus: ?5.8 lakh crore) with the Net borrowing at ?4.2 lakh crore.


The government has estimated nominal GDP growth at 11.8% for FY18 (Tax-GDP ratio of 7.3%) and revised its FY17 nominal GDP growth to just 10.2% (Debt to GDP ratio of 46.7%) from 11.4% in the FY17 budget estimates of last year. The actual tax collections has exceeded budgeted tax collections in the last 2 years, after falling short for 4 consecutive years.

Some major Tax policy changes

  • The government has provided ?10,000 crore for recapitalisation of banks.
  • Foreign Investment Promotion Board has been abolished from FY18.
  • For the salaried class, there has been a tax cut from 10% to 5% for having income between ?2.5 lakh to ?5 lakh.
  • Transaction ceiling for cash at Rs 3 lakh.
  • Income tax for companies with annual turnover upto ?50 crore reduced to 25%.

Government Borrowing

In FY18BE, the Net borrowing came in at ?4.2 lakh crore, higher by ?16,500 crore over FY17RE.Gross borrowing for FY18BE comes in at ?5.8 lakh crore, almost unchanged from the Y17RE Gross borrowings of ?5.82 lakh crore. After adjusting for redemption (switch/buyback) of ?1.6 lakh crore. 77% of the FY18 deficit is to be financed through market borrowings.

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