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Centre might need Rs 57,000 crore spending cut to meet fiscal target

Centre shows optimism of achieving the target of 4.1% at back of recent measures and turn around in manufacturing

Jayshree P Upadhyay  |  New Delhi 

on Tuesday said he was hopeful of meeting the target of 4.1 per cent of gross domestic product (GDP). To achieve this, the government might need to reduce its spending by Rs 57,000 crore in 2014-15.

“Revenue collections, which were affected due to low manufacturing in the last two-three years, are turning around and we hope to meet our fiscal targets," Jaitley said while addressing a Central Board of Excise Customs function here.


He added India was much better placed in terms of its (CAD) and reserves looked robust. The CAD for 2014 was 1.6 per cent of GDP and many global brokerage houses have pegged it at 0.3-1 per cent in 2015.

The Centre might resort to expenditure cuts to meet its fiscal target. Against the target of Rs 5,31,177 crore for 2014-15, the deficit stood at Rs 5,25,134 crore till November 2014. The government must spend Rs 6,043 crore more than it receives in the remaining four months of 2014-15 if it intends to stay on target.

Centre recently took measures to boost revenue. Recently, it increased the excise duty on petrol and diesel, amid a dip in global oil prices. The four excise duty hikes since November will result in Rs 21,000 crore in additional revenue this financial year.

Divestment in key public sector undertakings has occurred only for the Steel Authority of India. But the government recently announced stake sales in four companies, including Bharat Heavy Electricals Limited that were earlier not on the divestment roster. At current market prices, the government’s kitty could swell by Rs 18,000 crore. Additionally, the government is planning to divest Rs 5,000 crore through an exchange-traded fund for PSUs.

The government is also banking on Rs 45,000 crore through telecom spectrum sales this financial year. The expected Rs 1.47 lakh crore from auction of 92 coal mines by March will go to the states, according to Coal Minister Piyush Goyal.

If tax revenue falls short by roughly Rs 1 lakh crore, as estimated in a mid-year analysis by the finance ministry, the Centre will have Rs 70,000 less, since almost 30 per cent of its revenue goes to states.

Despite the additional revenue, the Centre could still be staring at a gap of Rs 57,000 crore, which it might need to offset by expenditure cuts.

First Published: Wed, January 28 2015. 00:45 IST
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