The forthcoming Budget may prove true the apprehensions of fiscal deficit being revised upwards as fiscal deficit in the first two months account for over one-fourth of the projections on this count, which does not augur well for interest rate cut demanded by corporates.
Fiscal deficit shot up to Rs 90,758 crore for April-May period from Rs 54,100 crore in the same months a year ago as stimulus packages hit the government kitty and increased its expenditure, according to figures released by the Controller General of Accounts today.
Fiscal deficit in the first two months of the current fiscal constituted 27.3 per cent of the interim Budget estimates of Rs 3,32,835 crore for the entire 2008-09.
For the corresponding period of last year, fiscal deficit had constituted 54.9 per cent of the projections. However, that time fiscal deficit was projected to be only 2.5 per cent of GDP, which was later revised upwards to 6 per cent that turned out to be 6.2 per cent.
The rising fiscal deficit may lead the government to further increase its borrowings. When the government raises more money through bonds, banks would be induced to park their money with government papers money, leaving little room for cutting interest rate.
Three stimulus packages announced has widened fiscal deficit — the gap between the government's expenditure and revenue as the stimuli reduced excise duty by 6 per cent, service tax by 2 per cent and raised planned expenditure.