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The Union government has proposed a dramatic contraction in its fiscal deficit for 2014-15 and the numbers on revenue and expenditure it has projected suggest that the estimates are realistic.
An internal note of the finance ministry prepared for its annual financial statement states that the Centre’s fiscal deficit (the gap between its total expenditure and receipts minus borrowing) in 2014-15 will drop to one per cent of gross domestic product (GDP), down from an uncomfortably high 4.8 per cent of GDP in 2013-14.
Significantly, the reduction is proposed to be achieved not through a cut in its capital or Plan expenditure, but through higher revenues from disinvestment of government equity in public sector undertakings and improved tax collections. An expenditure cut, too, has been proposed, but that is on the non-Plan side.
A sharp reduction in the outgo under the subsidies head has been planned for both the petroleum and fertiliser sectors. The remaining contraction in the fiscal deficit is expected to be achieved through disinvestment proceeds of around Rs 100,000 crore and higher tax collections of close to Rs 80,000 crore. Higher tax collections are premised on a pick-up in India’s GDP, early signs of which are already available with seven per cent growth registered in the first quarter of 2013-14
