We grow more confident of our call that the Centre will see fiscal slippage of 30bp of GDP. We see three risks of fiscal overrun:
- GST collection slippage (0.2% of GDP);
- lower-than-expected divestment proceeds (Rs92bn FYTD vs Rs800bn BE) and
- step up in pre-poll public spend.
To a degree, this will be funded by cutting capital expenditure and utilizing the government surplus with the RBI swings on the coming state polls. Opinion polls are currently pointing to a hung Parliament in May 2019. 0.2% of GDP shortfall. We introduce a seasonally adjusted GST tracker to assess GST collections monthly. This suggests that GST collections are so far on track only because of an Rs626bn spillover from March in April. Going by post-April trends, we see a possible slippage of Rs400bn/0.2% of GDP, much higher than the vanilla estimates without applying seasonality.
We have used the seasonal factors generated from data on Union excise duty collections to work out the seasonality of GST collections, using X-12, for the Centre as well as states in the absence of concrete monthly data for the latter. After all, the seasonality of indirect tax collections by either the centre or states mirrors that of economic activity.