Fiscal deficit may touch 5%: Economists
Echoing the PM’s Economic Advisory Council’s (EAC) views that meeting the fiscal deficit target for 2011-12 would be a ‘significant challenge’, most economists have said it would be close to 5 per cent of the GDP due to underestimation of government spending as well as higher fuel subsidy. Government finances have already become strained as tax revenues have been unable to keep pace with expectations. It also does not have the cushion of any windfall revenues to bail it out, like the additional Rs 1 lakh crore it earned from 3G spectrum auction in 2010-11. Last week, the Reserve Bank of India also warned that the Centre faces a huge challenge in setting its finances in order and could slip on its fiscal deficit target. In fact, the Centre’s fiscal deficit in the first quarter of 2011-12 touched nearly 40 per cent of the full-year target and quadrupled to Rs 1.6 lakh crore from a year ago. While expenditure has largely been under control, lower realisation from revenue receipts in the first quarter is being blamed for the high deficit. “There will be some amount of fiscal slippage in 2011-12 and though it may not be too high, the deficit will still touch about 5 per cent of the GDP,” said DK Srivastava, director, Madras School of Economics. Agreed Sunil Sinha, head of research and senior economist at rating agency Crisil. “We believe that the fiscal deficit for FY’12 is likely to touch 5 per cent of the GDP due to a significant under statement of government spending and also higher crude prices which will lead to a higher fuel and fertiliser subsidy,” he said adding that there are also questions on whether the disinvestment targets would be met. The Centre has projected a fiscal deficit of 4.6 per cent of the GDP in 2011-12, which the EAC in its Economic Outlook 2011-12 said may be difficult to achieve due to a higher subsidy payment. “The government should look at the behaviour of revenue and expenditure and make corrections if required,” C Rangarajan, chairman of the EAC said. The Centre’s tax collections have been impacted by heavy income tax refunds in the first two months of the fiscal.
https://www.financialexpress.com/news/fiscal-deficit-may-touch-5-economists/825851/0
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