Fiscal Deficit Next Year To Be Capped At 4.5% Of Gdp

The fiscal deficit target for the financial year 1997-98 is expected to be pegged between 4 per cent and 4.5 per cent of the gross domestic product, say government sources.

This is in keeping with the United Fronts common minimum programme that seeks to progressively pare the fiscal deficit, which reflects the net borrowing requirement of the centre, to a level of 4 per cent of GDP.

The government is likely to end the current financial year with a fiscal deficit of around 5.2 per cent of GDP compared with the target of 5 per cent. However, sources in the Prime Ministers Office said the target could be achieved if some divestment proceeds accrue in the current fiscal year. The fiscal deficit was Rs 42,048 crore at the end of November 1996, which is about 67.5 per cent of the budget estimate of Rs 62,226 crore.

 

The fiscal deficit in the corresponding period of the previous year was Rs 36,096 crore, about 63 per cent of budget estimates.

The finance ministry has been under pressure on account of the fact that revenue receipts under some heads have been sluggish and it has been forced to accommodate, among other things, additional expenditure for defence and special plan assistance to Jammu and Kashmir.

A finance ministry note refers to these points, saying that these (additional expenditures) are likely to adversely affect the fiscal deficit estimates for the current financial year.

It also concedes that the current financial years target of raising Rs 5,000 crore through disinvestment of shares of public sector units is not likely to be met.

However, finance ministry sources said the shortfall in divestment receipts would be offset by the fact that the Fifth Pay Commissions recommendations would not be effected during this fiscal.

The government has set up two panels to look into the recommendations and will, therefore, be taking a view on the subject only after March.

Detailing the extra expenditure being incurred by the government, the finance ministry paper states that in addition to the supplementary grant of Rs 2,170 crore moved in the winter session of Parliament, other expenditure heads are:

Rs 1,200 crore on defence services;

Rs 650 crore as special plan assistance for Jammu & Kashmir;

Rs 150 crore on the space programme; and

Rs 170 crore as additional budgetary support for the Railways to meet certain capital expenditure.