Tamed fisc raises FM's ambitions

BUDGET & GOVERNMENT

Target for 2007-08 set at 3.3 per cent

In spite of better-than-expected economic growth and buoyant revenues, the revised estimate for the current year's fiscal deficit is 3.7 per cent of the gross domestic product, which is slightly better than the Budget estimate of 3.8 per cent.

The economy grew by 8.6 per cent in the October-December quarter of 2006-07 from a year earlier, boosted by services and manufacturing.This was lower than the revised July-September rate of 9.2 per cent.

For the coming financial year, 2007-08, Finance Minister P Chidambaram has projected a fiscal deficit of 3.3 per cent.

"Fiscal consolidation is proceeding according to the Fiscal Responsibility and Budget Management (FRBM) Act," Chidambaram said. The finance ministry has projected to achieve the FRBM target of zero per cent revenue deficit and 3 per cent fiscal deficit by 2008-09.

The fiscal deficit measures the gross borrowings of the government. A poll of economists done by Business Standard a week before the Budget had shown that the fiscal deficit for 2006-07 was expected to be around 3 per cent.

However, gains in revenue receipts (revised estimates of Rs 423,331 crore as against the Budget estimates of Rs 403,465 crore) were negated by lower-than-expected capital receipts (revised estimates of Rs 158,306 crore against Budget estimate of Rs 160,526 crore) and higher-than-expected interest payments (revised estimates of Rs 146,192 crore against Budget estimates of Rs 139,823 crore).

Budget figures released today show that the government's 2006-07 revenue deficit also reduced from Rs 83,436 crore, or 2 per cent of the GDP, in the revised estimates from Rs 84,727 crore (2.1 per cent) in the Budget estimate.The Budget estimate for 2007-08 is 1.5 per cent.

For the first time in the process of fiscal correction, the country will see a primary surplus of 0.2 per cent of the GDP in 2007-08.

Based on the budgeted fiscal deficit reduction to 3.3 per cent, nominal GDP growth for 2007-08 is projected at 13 per cent at Rs 46,33,719 crore. The GDP for 2006-07 is estimated at Rs 41,00,636 crore.

Budget 2007-08 estimates also peg the revenue deficit at Rs 71,478 crore, which will be 1.5 per cent of GDP.

The fiscal deficit on point-to-point basis was lower by nearly 12 per cent, at Rs 94,854 crore between April-December, 2006-07, as compared to Rs 1,08,334 crore in the same period the previous year.