The Rs 67,700 crore revenue mop up from auction of 3G licence will help the government cut its fiscal deficit to nearly 4.9 per cent from 5.5 per cent of GDP projected in the Budget.
The auction for 3G mobile telephony licence that lasted 34 days ended today and bidding for Broadband Wireless Access spectrum would commence in two days -- which would bring in additional revenue.
Yesterday, Finance Minister Pranab Mukherjee had said that the money generated through 3G spectrum (radio waves) auction would provide the government more fiscal space to operate.
"Of course, getting extra money from the 3G auction will provide a little more elbow room and fiscal space for me to manage financial matters," he had said.
Fiscal deficit targets went awry after global financial crisis spread to the Indian economy in September 2008.
While fiscal deficit should have been reduced to three per cent of GDP during 2008-09, it more than doubled to 6.2 per cent, after the government provided stimulus to the economy by cutting taxes and stepping up expenditure.
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During 2009-10, fiscal deficit further widened and is projected to have touched 6.7 per cent of GDP.
In the current fiscal, it is projected to be 5.5 per cent of GDP, after the government partially withdrew stimulus by raising excise duty on non-petroleum products by two per cent to 10 per cent.
As such, extra money generated through auction of 3G spectrum would give extra fiscal room to the government, hard-pressed to keep fiscal deficit under control on the one hand, and step up expenditure on social welfare schemes, on the other.