Finance Minister P Chidambaram on Thursday said his ministry would reassess the Centre’s fiscal deficit target of 5.1 per cent of the gross domestic product (GDP) for 2012-13 in the mid-year review of the economy. Already, fiscal deficit has touched 37 per cent of Budget estimates in just three months of the current financial year.
The government aims to bring down fiscal deficit — the gap between expenditure and revenue collection — from 5.7 per cent of GDP in 2011-12 to 5.1 per cent or about Rs 5.13 lakh crore in the current financial year.
In the Budget for 2011-12, fiscal deficit was pegged at 4.6 per cent of GDP.
Chidambaram said the reduction in the fiscal deficit is designed with a mix of reduction in total expenditure as percentage of GDP and improvement in gross tax revenue.
However, gross direct tax revenues (inclusive of refunds) grew just 5 per cent to 1.39 lakh crore in the first four months of this financial year against Rs 1.32 lakh crore in the corresponding period of last year.
On the other hand, indirect tax collections in the first quarter of this fiscal rose by 13.8 per cent to about Rs 1.07 lakh crore, slower than the targeted 27 per cent growth for the entire fiscal.
On the expenditure front, the government has taken several steps including 10 per cent mandatory cut on non-plan expenditure and economy measures like rationalisation of expenditure and optimisation of available resources.
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Also, the government endeavours to restrict expenditure on central subsidies.
“Similar steps are expected to be continued in the coming years to contain the fiscal deficit,” Chidambaram said.
The Indian economy is facing slowdown with the economic growth touching a nine-year low of 6.5 per cent in 2011-12.
Industrial production in the first quarter stood at a three-year low of 0.1 per cent against an expansion of 6.9 per cent in the similar period last fiscal. Several economists and policy makers have pegged growth to be quite low this fiscal in the range of 5.5-6.5 per cent this financial year, which will have its imapct on tax realisation. Also, lower economic size makes a given fiscal deficit look higher as per cent of GDP.