April-Nov fiscal deficit at Rs 1.86 lakh cr

The Centre's fiscal deficit narrowed by 39.08 per cent year-on-year to Rs 1.86 lakh crore in April-November, 2010, on the back of better-than-expected revenue from the sale of spectrum and robust tax collections.

In comparison, the central government's fiscal deficit stood at Rs 3.06 lakh crore in the corresponding period of the previous financial year.

The sharp fall in the Centre's fiscal deficit was also due to the fact that despite the enhanced flows to the central exchequer, there was not a commensurate increase in expenditure by the government and the Reserve Bank has blamed this for the present cash crunch in the system.

Nevertheless, expenditure by the central government rose by 15 per cent during the period to Rs 6.90 lakh crore from 6.21 lakh crore in the year-ago period.In contrast, the Centre's fiscal deficit for the corresponding period last year stood at 76.4 per cent of the Budget estimate for the entire 2009-10 financial year.

At Rs 1.86 lakh crore, the fiscal deficit in April- November, 2010, amounted to 48.9 per cent of the Budget estimate of Rs 3.81 lakh crore for the entire 2010-11 financial year, according to data released by the Controller General of Accounts.

The government collected Rs 2.96 lakh crore in taxes during the eight-month period, which was 55.5 per cent of the budgetary target for the entire fiscal.

In comparison, tax collections during the same period last fiscal amounted to just 49.1 per cent of the whole-year target.

Furthermore, non-tax revenue in April-November, 2010, stood at Rs 18 lakh crore, higher than the Budget estimate for the entire fiscal, primarily on account of higher realisation from the auction of spectrum, which raked in approximately Rs 70,000 crore more than the government estimated.

The Centre's fiscal deficit targets went awry after the government provided a stimulus to the economy in the aftermath of the global financial crisis that broke out in 2008.

Among the measures, the government slashed taxes and stepped up public expenditure to spur the growth of the economy.

However, this also led to widening of the fiscal deficit.

As a result, the fiscal deficit doubled to over 6 per cent in 2008-09, as against the maximum permissible limit of 3 per cent stipulated by the Fiscal Responsibility and Budget Management Act.

The deficit rose further to over 6.5 per cent last fiscal.

After the government partially rolled back the stimulus by raising excise duty, the Budget estimates pegged the fiscal deficit at 5.5 per cent of the GDP.

However, despite the higher realisation from the sale of spectrum for high-speed telephony and broadband services, the government expects the fiscal deficit to be contained at the same level as its Budget estimate.