GDP base year revision not to help govt contain fiscal deficit

The new series of national accounts with 2011-12 as base year for computing economic growth rate is unlikely to provide any cushion to government in meeting the fiscal deficit target of 4.1 per cent of GDP.
The CSO data released today revealed that with the revision of base year, the size of economy or Gross Domestic Product (GDP) is pegged at Rs 126.54 lakh crore at current prices during 2014-15 lower than the budget estimates of Rs 128.76 lakh crore.
"Nominal GDP has been pegged at Rs 126 lakh crore... somewhat lower than the level assumed in the Union Budget, which would make the task of restricting the fiscal deficit at 4.1 per cent of GDP slightly more stringent," said Aditi Nayar, senior economist with ICRA.

As per the data released by Controller General (CGA) of Accounts on January 30, the fiscal deficit during April-December period was Rs 5.32 lakh crore or 100.2 per cent of the 2014-15 estimate, mainly because of subdued revenue realisation.
The fiscal deficit -- the gap between government expenditure and revenue -- during the same period last year was at 95.2 per cent of that year's target.
The experts were expecting expansion of the size of economy with reveision of base year to 2011-12 from 2004-05, which could have provided a cushion to government for meeting fiscal deficit target.

The budget had pegged the fiscal deficit at 4.1 per cent of GDP during the current fiscal assuming the size of economy at Rs Rs 128.76 lakh crore.

However, as per advance estimates put the economy at Rs 126.54 lakh crore, providing no cushion to the government on the fiscal front target.
"Current account deficit will be under control and will try to keep fiscal deficit also within the prescribed limit," Finance Minister Arun Jaitley said at the first Meeting of the Parliamentary Consultative Committee.
Some of the experts feel that now the fiscal deficit target would be met only when the allocated funds remain unspent by ministries and departments particularly Plan expenditure.