GDP base year revision may help govt contain fiscal deficit

With the revision of base year, the size of economy is expected to be bigger which would help the government in keeping the fiscal deficit lower

A new series of national accounts with 2011-12 as base year for computing economic growth rate will be released tomorrow, which may provide some cushion to government struggling to meet fiscal deficit target.

With the revision of base year, the size of economy is expected to be bigger which in turn would help the government in keeping the fiscal deficit, computed as a proportion of the Gross Domestic Product (GDP), lower.

"Usually, the size of economy expands by 1-3 per cent after the revision of the base year," former member of Planning Commission Abhijit Sen told PTI.

As regards its impact on fiscal deficit, Sen said, it would depend upon the impact of revision of the size of the economy.

"It is also possible that size of economy reduces as impact of base year revision could be either ways," he added.

The base year for computing national accounts is revised by the Statistics Ministry periodically to present a more realistic picture of the economy.

The government is committed to restricting the fiscal deficit at 4.1 per cent of the GDP during the current fiscal, the lowest level in seven years, and has taken several steps towards it.

The government had put in place a fiscal consolidation roadmap as per which the fiscal deficit has to be brought down to 3 per cent of the GDP by 2016-17.

To reduce the fiscal deficit to seven-year low, it has announced a slew of austerity measures aimed at cutting non-plan spending by 10 per cent.

As per the data released by Controller General of Accounts on December 31, India's fiscal deficit during the April-November period was 98.9 per cent of the 2014-15 estimate, primarily on account of subdued revenue realisation.

Fiscal deficit - the gap between government expenditure and revenue - during the same period last year was 93.9 per cent of that year's target.