The Centre’s fiscal deficit stood at Rs 141,587 crore in the first two months of 2012-13, constituting 27.6 per cent of the budget estimates (BE) for the entire financial year. Continuation of the trend might make it impossible to rein in the fiscal deficit at 5.1 per cent of gross domestic product (GDP).
In the corresponding period of 2011-12, deficit was much higher, constituting 31.7 per cent of the BE. But, it also surpassed BE by more than one percentage point in relation to GDP. It finally stood at 5.76 per cent of the GDP in 2011-12, against the BE of 4.6 per cent.
The decline in terms of percentage of BE for the first two months of this financial year compared to the corresponding period last year was due to higher tax receipts, which stood at 5.1 per cent and 3.6 per cent respectively.
The revenue deficit, too, seems fast approaching the BE, at 33.8 per cent in the first two months against 35.8 per cent a year ago. While the government expenditure for the period was at 12.8 per cent (Rs 190,895 crore) of the BE, receipts remained low at just five per cent or Rs 49,308 crore. Tax revenues remained low, at 5.3 per cent or Rs 40,925 crore.
The government has a target of a fiscal deficit of Rs 513,590 crore for the year, which will mean 5.1 per cent of the GDP, assuming real economic growth rate of 7.6 per cent and 5.4 per cent inflation. For the revenue deficit, the annual target is Rs 350424 crore, which will mean 3.4 per cent of the estimated GDP. Of this, Rs 118,515 crore had been touched at the end of May.
At the same time, the Prime Minister’s Economic Advisory Council said the government was determined to contain the fiscal deficit. “There is a debate between austerity and growth and we have made up our mind to contain fiscal deficit,” chairman C Rangarajan said in Kolkata. The government would not go for providing stimulus across the board and only specific sectors would be considered, he told reporters on the sidelines of an event at the Indian Statistical Institute.
In fact, plan expenditure in the first two months of this year constituted just 8.6 per cent, against 10.2 per cent in April-May 2011-12. On the other hand, non-plan expenditure rose to account for 15.1 per cent against 14.9 per cent over the period.
Rangarajan said there was scope for reducing subsidies in LPG, diesel and fertiliser. This would require political consensus, he added.
Former finance minister Pranab Mukherjee, too, had said the deficit would be curbed by reducing subsidy outgo to less than two per cent of GDP in 2012-13.