FM sets target at 5.5%

FM lays roadmap for fiscal consolidation and a transparent accounting system.

In line with the recommendations of the 13th Finance Commission, finance minister Pranab Mukherjee today presented a roadmap for fiscal consolidation and set the fiscal deficit target at 5.5 per cent of the gross domestic product (GDP) for 2010-11.

Moreover, Mukherjee also moved towards a transparent fiscal accounting system by including expenses due to oil and fertiliser subsidies as liabilities (of 2008-09) and cash subsidy in 2009-10, and stated the deficit for current fiscal to be at 6.9 per cent of GDP as against a comparable figure of 7.8 per cent of GDP in 2008-09. The target of 5.5 per cent for 2009-10 includes expenses on account of oil and fertiliser subsidies.

The actual net borrowing of the government in 2010-11 would be Rs 3,45,010 crore. The revenue deficit is also expected to show significant decline to 4 per cent of GDP from 5.3 per cent in the current financial year. The fiscal consolidation plan would be met through the availability of disinvestment proceeds and an overall reform in the expenditure management of the government including subsidies.

For 2009-10, the fiscal deficit was revised downwards to 6.7 per cent from a projected target of 6.8 per cent. The fiscal deficit for 2009-10 is the widest deficit in the last two decades.

In absolute terms, however, the fiscal deficit for 2009-10 was revised up by 3.25 per cent to Rs 4,14,041 crore from a target set at Rs 4,00,996 crore. For the next financial year, the fiscal deficit in absolute terms is estimated to be at Rs 3,81,408 crore.

Such an increase in fiscal deficit in absolute terms is on account of lower revenue receipts in the current fiscal even as expenditure more or less met the targets. In proportion to GDP, the revenue deficit increased to 5.3 per cent, up from an earlier projection of 4.8 per cent.