SBI hopes fiscal deficit can be reduced to 3.95% in FY2015

Fiscal consolidation roadmap would be significantly easier to achieve

The Supreme Court has cancelled allocation of coal blocks. In a landmark judgment, out of the 214 captive blocks that the Supreme Court declared illegal, 105 blocks belonged to private companies. Of these, 42 blocks were operational and ready to produce nearly 53 million tonnes (mt) of coal, less than 10% of the country's total output of the fuel.

As per the research report from Economic Research Department of State Bank of India, the net burden on CAD would be an additional increase of $0.7 billion, with the comfort of a lower oil import bill negating the increase in coal imports.

The Supreme Court has also slapped an additional levy of Rs 295 per tonne. This compensatory payment is expected to garner Rs 7000-8000 crore. Further Government will save around Rs 15,000 crore in fuel subsidy bill due to decline in oil prices.

The impact of both, assuming all other things unchanged, SBI hopes that the fiscal deficit would be brought down by 18 bps to 3.95% from BE 4.13% of 2014-15.

Dr. Soumya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, State Bank of India, said, "With increased earning of the exchequer we do believe that the targeted fiscal consolidation roadmap of limiting the same at 3% by fiscal year ending 2017 would be significantly easier to achieve, and we may be well below 3% by 2017."

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