Kelkar Panel disputes Budget figures on fiscal deficit

Says fiscal deficit will cross 6% if reforms suggested by it are not implemented

The Kelkar panel on fiscal consolidation has questioned the Budget numbers given on subsidies and tax receipts for 2012-13 because of which it expects fiscal deficit to cross 6 per cent of the GDP in 2012-13, provided reforms suggested by it are not undertaken.

Those in know of the development said budget had underestimated fiscal deficit by Rs 1,30,000 crore.

Adding this figure to Rs 5,13,590 crore of fiscal deficit given in the Budget, a gap between the Centre's expenditure and receipts would turn out to be Rs 6,43,590 crore.

Given GDP figures in the Budget at Rs 1,01,59,884 crore for 2012-13, fiscal deficit at this level turns out to be 6.33 per cent of GDP, , against 5.1 per cent estimated in the Budget. In the first four months of 2012-13, fiscal deficit has already crossed 50 per cent of Budget estimates.

However, this figure would be that much, if no reforms happened. 

But if the government undertakes reforms on oil and urea price fronts and disinvestment targets are met, fiscal deficit could be curtailed a lot, the panel observed. Besides, the panel recommended improving tax administration to shore up tax-GDP ratio.

They did not say how much fiscal deficit would ultimately be pruned to this fiscal, saying it depends on reforms carried out by the government.

Oil reforms are not as easy. A number of the committee had suggested reforms on that count. Meanwhile, the government is looking at the way underrecoveries of oil marketing companies are calculated, they added.

While the government has targeted to mobilise Rs 30,000 crore from disinvestment, the feedback that the committee got from the ministry was that no more than Rs 10,000 crore could be mobilised this way. As such, the committee recommended meeting at least the target to prune fiscal deficit.

The committee did not per se recommend selling of surplus land with the public sector units, but told the Finance Ministry that it can raise resources under non-debt capital receipts by either selling stake in these enterprises or unlocking value of the surplus land.

 

It said monetising land is one of the options to realise non-debt capital receipts.

Though those in know of the development did not give the exact figures the committee recommended for fiscal deficit for the next two financial years-- 2013-14 and 2014-15--they said the 13th Finance Commission had set the target of cutting the deficit at 3 per cent of GDP in 2014-15. In fact, the commission had recommended fiscal deficit at 3 per cent of GDP for 2013-14 as well.

The original target of cutting fiscal deficit to 3 per cent was for 2007-08, which was extended by a year. That also could not be met due to global financial crisis.