New fiscal targets may be too ambitious, say economists

Terming the Interm Budget by Finance Minister P Chidambaram as 'reasonable', economists howver said meeting fiscal targets will be difficult unless growth picks up.

 

"Overall...It is a reasonable budget given that it is an election year. Next year's fiscal target is very stiff and without growth moving up it is difficult to meet," Crisil chief economist D K Joshi said.

 

Axis Bank chief economist Saugata Bhattacharya said the budget is a little aggressive in terms of fiscal consolidation target. The fiscal deficit target of 4.1% is an aspirational target.

 

Economic growth for FY14 is estimated at 4.9%. Last fiscal, growth fell to 4.5%. Economists, however, believe FY15 fiscal deficit target for 4.1% may be revised upwards when the new government comes to power.

 

The current account deficit (CAD) will be contained at $ 45 billion this financial year, well below the record high level of $ 88 billion in FY13, the minister said. The tax revenue for FY15 has been estimated at Rs 13.79 lakh crore as against the revised estimate of Rs 11.58 lakh crore in FY'14.

 

"The assumption on tax front is an aggressive one. The nominal GDP growth is seen around 13% and if it is not achieved, we could see some disappointment on tax collection front," Shubhada Rao of Yes Bank said.

 

Foreign brokerage Credit Suisse said with the general elections round the corner this is not a 'normal' budget, but largely a chance to tell listening voters what the government had achieved during 10 years in office.

 

The government today cut Rs 79,790 crore from the Plan expenditure of Rs 5,55,532 crore for the current financial year due to burgeoning fiscal deficit. The interim Budget projects revised estimates of the Plan expenditure at Rs 4,75,532 crore for 2013-14.

 

"There are concerns over quality of fiscal adjustment as plan expenditure has been cut," Crisil's Joshi said. The government also pegged net borrowing for 2014-15 at Rs 4.57 lakh crore, Rs 11,580 crore less than the revised estimates for FY'14.

 

During 2013-14, the government borrowed Rs 4,68,901.87 crore from the market. "Net market borrowing of Rs 4.57 lakh crore is expected to finance 87% of the fiscal deficit, while gross market borrowings are likely at Rs 5.97 lakh crore in FY15, better than market expectations of Rs 6.1-6.4 lakh crore," Japanese brokerage firm Nomura said.