NEW DELHI: India's
fiscal deficit in the April-November period reached 94% of the targeted budgetary estimate of Rs 5.42 lakh crore, raising concerns that India may well overshoot its ambitious target of containing the deficit at 4.8% of gross domestic production (GDP).
Finance minister
P Chidambaram has said that fiscal deficit target of 4.8% is a "red line" that "will not be crossed". But as the country's growth rate slipped to a decade-low 5% in the year ended March from an average of 8% over the past decade, both rating agencies and economists have expressed fears that the red line will be breached.
"The central government's fiscal situation remains gloomy, with high deficits and a challenging revenue outlook for the rest of this fiscal. Some productive expenditure may need to be cut or deferred to ensure that the fiscal deficit does not exceed the FY14 target, which may negatively impact the economic growth momentum," said Aditi Nayar, senior economist,
ICRA.
The Reserve
Bank of India had also noted in its
Financial Stability Report on Monday that the relatively high fiscal deficit was a major concern. The government is committed to lower the fiscal deficit to 3% of
GDP by 2016-17.
The fiscal deficit in the April-November period rose to Rs 5.1 lakh crore. In the year-ago period, the deficit was 80.4% of the budgeted target. The finance minister was able to contain the deficit at 4.9% of GDP in the last fiscal year.
Total expenditure in the first eight months of this fiscal stood at Rs 10.2 lakh crore, 61.3% of the budgeted estimate. In the year-earlier period, the government had spent 58.2% of its estimated budget.
The revenue deficit of Rs 3.93 lakh crore at the end of November has already overshot the whole year's target of Rs 3.79 lakh crore. Net tax receipts in the April-November period stood atRs 5.02 lakh crore, 47.6% of the estimated revenue.
Revenue collection has been sluggish amid the growth slump. Gross
direct tax collections rose 13.18% to Rs 3.68 lakh crore in the April-November period while indirect tax collections were up 4.9% at Rs 3.07 lakh crore compared with Rs 2.93 lakh crore in the year earlier.
The government through its disinvestment programme has so far only manage to raiseRs 3,000 crore against the target ofRs 40,000 crore. According to rating agency Crisil, the government can reduce its fiscal deficit by as much as Rs 20,000 crore this fiscal by using the cash reserves of public sector units (PSUs).
"Apart from the expected shortfall in tax revenue collections, the Union government may not be able to meet its disinvestment target, which could result in it falling short of the budgeted fiscal deficit. In such a scenario, the cash reserves of PSUs provide an alternative source of income," said
Crisil Research president Mukesh Agarwal in a note. Crisil Research expects this year's fiscal deficit at 5.2% of GDP.
