Fiscal deficit at 3.5%, lower than forecast

ECONOMY AT FULL THROTTLE

The central government's fiscal deficit "" the difference between its total expenditure and receipts, excluding borrowings "" for 2006-07 has been reined in at 3.5 per cent of gross domestic product (GDP), an impressive reduction considering that it is better than the revised estimate of 3.7 per cent for the year.

The revenue deficit (the shortfall between revenue incomes and revenue disbursements) stood at 2 per cent of GDP, the same as the revised estimate, but better than the 2.1 per cent Budget 2006-07 estimate, the Controller General of Accounts said today.

This improvement in the fiscal situation reflects buoyant revenue collections during the year, at Rs 4,33,715 crore, a 2.5 per cent increase at Rs 10,384 crore over the revised revenue estimate figure for the year.

The government also managed to keep expenditure within projections. As against, the projected expenditure of Rs 5,81,637 crore (revised estimate for the year), total expenditure stood at Rs 5,82,992 crore, higher by Rs 1355 crore or a 0.2 per cent excess.

The Fiscal Responsibility and Budget Management (FRBM) Act mandates that the government reduce the fiscal deficit by an amount equivalent to 0.3 per cent or more of the GDP at the end of each financial year, starting with 2004-05. Thus, the Centre is committed to cutting the fiscal deficit to 3 per cent of GDP by March 2009.

However, it seems unlikely that the government would be able to meet the FRBM target of bringing down the revenue deficit to zero.

"The fiscal deficit has been contained because of robust revenues. The government collected Rs 2,41,806 crore from indirect taxes and Rs 2,30,091 crore from direct taxes," said Finance Minister P Chidambaram.

The non-plan expenditure at Rs 4,12,960 crore, is a Rs-4,053 crore (around 1 per cent) increase over the revised estimate.

The government managed to squeeze Plan expenditure to 98.4 per cent (Rs 1,70,032 crore) as against the revised estimate of Rs 1,72,730 crore for the year.