- Fiscal deficit and revenue deficit were budgeted at `5, 31,177 crore (4.1% of GDP) and `3, 78,348 crore (9 percent of GDP) respectively in 2014-15.
- The BE for 2014-15 aimed at achieving tax to GDP and non-debt receipt to GDP ratios of 10.6% and 9.8% respectively as against a 13.9% total expenditure to GDP ratio.
- As per the data on union government finances for April-December 2014 released by the Controller General of Accounts (CGA), the gross tax revenue increased by 7% in comparison to the corresponding period of the previous year and is at 58.3% of BE in April-December 2014. The non-tax revenue during April- December 2014 registered an increase of 27.3% over the corresponding period of the previous year due to increase in interest receipts and dividends and profits. In non-debt capital receipts, there is significant shortfall as of December 2014, mainly on account of shortfall in disinvestment receipts, as only ` 1952 crore of the budgeted amount of ` 58,425 crore has been realized.
- A significant positive outcome in 2014-15 so far is a decline in petroleum subsidy by `4908 crore compared to the corresponding period in 2013-14 due to fuel pricing reforms and fall in the global prices of petroleum products.
- Headline inflation measured in terms of the Wholesale Price Index (WPI) (base year 2004-05=100) which remained persistently high at around 6-9% during 2011-13 moderated to an average of 3.4% in 2014-15(April- December) on the back of lower food and fuel prices.
- As fuel has larger weight in the WPI, the decline in fuel prices led to a sharper reduction in the WPI as compared to the Consumer Price Index (CPI).
- Retail inflation as measured by the CPI (combined) (base year 2010=100) had remained stubbornly sticky around 9-10% during 2012-13 and 2013-14. Like the WPI inflation, CPI inflation has also moderated significantly since the second quarter of 2014-15, with moderation in inflation observed in all the three major subgroups, viz. food and beverages, and tobacco; fuel and light; and others. The CPI (combined) inflation declined to a low of 5% in Q3 of 2014-15. As per the revised CPI (new series) with the base year 2012, headline CPI inflation stood at 5.1% in January 2015.
- Global factors, namely persistent decline in crude prices, soft global prices of tradable, particularly edible oils and even coal, helped moderate headline inflation. The tight monetary policy was helpful in keeping the demand pressures contained, creating a buffer against any external shock, and keeping volatility in the value of the rupee under check. During the last one year, the rupee remained relatively stable vis-à-vis the major currencies, which too had sobering influence on inflation. Moderation in wage rate growth reduced demand pressures on protein based items. Base effect also contributed to the decline in headline inflation.
- With the easing of inflationary conditions, the RBI has signaled softening of the monetary policy stance by cutting policy repo rates by 25 basis points to 7.75 percent in January 2015. Subsequently, the RBI also reduced the statutory liquidity ratio (SLR) by 50 basis points from 22.0% of net demand and time liabilities (NDTL) to 21.5%. The RBI adopted the new CPI (combined) as the measure of the nominal anchor – for policy communication from April 2014.
- With a view to ensuring flexibility, transparency, and predictability in liquidity management operations, the Reserve Bank revised its liquidity management framework in September 2014. The revised liquidity management framework helped the weighted average cut-off rates in the fourteen-day term repo auctions as well as in the overnight variable rate repo auctions to remain close to the repo rate.
