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Just a few days ahead of interim Budget 2014-15, a United Nations (UN) report has said the Centre is unlikely to meet its fiscal deficit target for this financial year, owing to low growth and high subsidy.
“In India, the government is unlikely to meet its target of reducing the deficit to 4.8 per cent of GDP (gross domestic product) in 2013-14, as growth is below projections and depreciation of the rupee is pushing up the subsidy bill,” the UN said in a report titled ‘World Economic Situation and Prospects 2014’.
However, the finance ministry is confident it will meet the target. This is despite its fiscal deficit for the first nine months of 2013-14 standing at 95.2 per cent of the Budget estimate.
This financial year, India’s GDP is officially projected to grow 4.9 per cent, against 4.5 per cent in the previous one. The size of the economy was scalded down by Rs 50,000 core compared to the 2013-14 Budget estimate---while Budget 2013-14 had estimated the economy would grow to Rs 1,13,71,886 crore, advance estimates pegged it at Rs 1,13,20,463 crore. In Budget 2013-14, the government’s fiscal deficit was estimated at 4.77 per cent of GDP, or Rs 5,42,499 crore. The revision in GDP reduces this to Rs 5,32,061 crore.
Till December, the deficit stood at Rs 5,16,390 crore. As such, the government can afford to overspend Rs 15,671 crore over its receipts in the January-March 2014 period.
In December, overspending by the government stood at Rs 7,000 crore; as of November, its fiscal deficit stood at Rs 5.09 lakh crore.
December had recorded advance tax payments; the next tranche of these payments will be recorded only in March. As such, overspending by the government in January and February might exceed the December figure.
Though larger-than-expected receipts from telecom spectrum auctions will help, these might not come as one-time licence fees. The government had budgeted garnering Rs 40,000 crore under this head.
The government is also trying to mop up Rs 54,000 crore from disinvestment in public sector undertakings, as well as selling residual stake sale in non-government companies. The Cabinet has cleared the government’s stake sale in Hindustan Zinc and Balco; these stakes might fetch the government about Rs 20,000 crore. The government had budgeted Rs 14,000 crore from sale of residual stake. The surplus on this front might make up for the tardy performance on the disinvestment front so far.
The government might cut Plan expenditure as well. Last year, it had resorted to heavy cuts in Plan expenditure to rein in fiscal deficit at 4.9 per cent of GDP, against 5.1 per cent estimated in the Budget and 5.2 per cent projected in the Revised Estimate.
To meet the fiscal deficit target for this financial year, the government might also have to roll over subsidies to the next year.
