The central government may fail to meet Budget targets for the fiscal and revenue deficit for the current fiscal year 2008-09, Finance Minister P Chidambaram said here today.
“Thanks to the global financial crisis, which is exerting pressures on all economies, it is likely that we may overshoot Budget targets (for fiscal and revenue deficits),” Finance Minister P Chidambaram said at a conference. “We will do our best to bring it as close to the target as possible,” he said. “Even if we don’t achieve the targets by March 2009, I am sure we can achieve it by March 2010.”
Separately, Chidambaram, in his reply to the debate on Supplementary Demands for Grants at the Rajya Sabha today, said this was no time to talk about the deficit, even as he hinted that borrowing was not the only source to meet extra expenditure and said the government would utilise savings and non-tax receipts.
| MISSING TARGET Trends in deficits (as % of GDP) of the central government after FRBM Act, 2003 | ||
| Year | Fiscal | Revenue |
| 2003-04 | 5 | 3.6 |
| 2004-05 | 4 | 2.5 |
| 2005-06 | 4.1 | 2.6 |
| 2006-07 | 3.40 | 1.9 |
| 2007-08 | 3 | 1.4 |
| 2008-09 (BE) | 2.5 | 1 |
“For the current fiscal, I had estimated 2.5 per cent fiscal deficit. But this is a difficult year and I am leaving myself headroom. If my earlier record is good, 2.5 per cent may become 2.2 per cent. But I would like to quote Paul Krugman (Noble Prize winning economist and columnist), as he is the flavour of the day. Just three days ago he said this is no time to talk about the deficit. That is why I have kept some headroom. Even if the deficit increases by 0.2 or 0.3 per cent, so what?” Chidambaram said.
The finance minister also pointed out that when the BJP-led National Democratic Alliance (NDA) had come into power in 1998, the fiscal deficit at the end of 1997-98 was 4.8 per cent. “When they left office after six years, the deficit was 4.5 per cent. So in six years, the NDA could achieve a fall in fiscal deficit from 4.8 to just 4.5 per cent,” he said.
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Finance ministry officials had recently told Business Standard that the fiscal deficit, which represents the excess of government’s total expenditure over the total income, excluding market borrowing, would be over 3 per cent this fiscal.
At this level, it would be above the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which mandates the government reduce the fiscal deficit to 3 per cent of GDP by 2008-09. It also requires that the revenue deficit, which is the difference between current revenue expenditure and receipts, be eliminated by March next year.
In Budget 2008-09, the government had said that while it would meet the annual target of reducing the revenue deficit by 0.5 per cent, it might take one more year to eliminate it completely, adding that the deferment was “entirely acceptable on account of the conscious shift in expenditure towards health, education and social sector”.
Meanwhile, Chidambaram today said the fundamentals of the Indian economy were strong and assured the Rajya Sabha that policy rates could be revisited if inflation continued to moderate.
Replying to a discussion on supplementary demands for grants in the Rajya Sabha, finance minister said, “We have taken pre-emptive measures (to deal with the global crisis) and we are drawing upon the inherent strength of our economy. We will overcome the crisis.”