Finance Commission gives new roadmap for fiscal deficit

With stimulus measures forcing the government to go way off its self-imposed fiscal discipline targets, the 13th Finance Commission has laid down new targets for fiscal and revenue deficits.

According to the deficit roadmap in the report of the Finance Commission, which primarily advises on revenue sharing between Centre and states, fiscal deficit is targeted to be brought down to 3 per cent by 2013-14 from around 6.8 per cent this fiscal, while revenue deficit is to be eliminated by the same year from around 4.8 per cent level this fiscal.

As per the earlier Fiscal Responsibility and Budget Management (FRBM) Act, fiscal deficit was to come down to 3 per cent and revenue deficit eliminated by 2008-09.

However, slowdown of the economy because of global financial meltdown forced the government to reduce taxes and step up expenditure, overshooting deficit targets.

But now, the Finance Commission has prescribed gradual withdrawal of stimulus.

Due to this and other prescriptions of the Commission, fiscal deficit is now targeted to come down to 5.7 per cent in 2010-11, 4.8 per cent the year after, 4.2 per cent in 2012-13 and 3 per cent the following year.

The fiscal deficit targets are slightly over 5.5 per cent for next fiscal and 4 per cent for 2011-12, set by the government in its papers laid in Parliament.