Country's April-May fiscal deficit at over 27% of full-year target

The Centre’s fiscal deficit for the first two months (April-May) of the current fiscal has increased to Rs 90,758 crore, which is 27.3 per cent of the Interim Budget estimate, according to the Controller General of Accounts (CGA) data released today. The Budget estimate for the fiscal deficit in the year 2009-10 is Rs 3,32,835 crore.

In the previous fiscal (2008-09), the first two months had accounted for 54.9 per cent of the year’s Budget estimate.

According to R Muralidharan, executive director, PricewaterhouseCoopers, the deficit is on account of indirect tax cuts effected during the last fiscal to deal with the economic downturn. Excise duty on most products was reduced by 6 percentage points to 8 per cent, while the service tax rate was cut by 2 percentage points.

The government financed the deficit mainly through market borrowing of Rs 78,975 crore in May 2009, as against Rs 21,865 crore in the corresponding period of the previous year.

The country’s fiscal deficit exceeded 6 per cent of  theGross Domestic Product (GDP) in 2008-09 from 2.7 per cent in 2007-08. In the face of the economic slowdown, the United Progressive Alliance (UPA) government’s Interim Budget had projected a fiscal deficit of 5.5 per cent in fiscal 2009-10.

Fiscal deficit for May 2009 stood at Rs 36,600 crore as tax receipts dipped by 10 per cent, mainly due to the decline in indirect tax collections. Total tax receipts for the month stood at Rs 20,332 crore, compared with Rs 22,732 crore in the year-ago month.