Excise collections for April have been badly hit, resulting the fiscal deficit touching 16 per cent of target in the very first month itself, which could douse expectations of interest rate cuts.
The three stimulus packages announced in December- February period to spur a slowing economy had cut excise duty by six per cent, which saw net collections turning negative at Rs 78 crore in April, according to figures released by the Controller General of Accounts.
Excise mop-up turning negative means that refunds were more than collections.
Of various levies imposed by the Centre, only income tax collections stood higher in April, 2009 against a year ago. Income tax collections stood at Rs 9,489 crore against 7,905 crore.
Service tax collections were also marginally lower at Rs 2,270 crore against Rs 2,271 crore.
All these, coupled with higher expenditure, led to Rs 54,100 crore of fiscal deficit in April, which is 16.3 per cent of the targeted Rs 3,32,835 crore for the entire fiscal.
Fiscal deficit is projected to be 5.5 per cent of GDP in the interim Budget for 2009-10.
Increased fiscal deficit might lead to additional market borrowings by the Government which may not allow interest rates to come down.
Fiscal deficit in April 2008 was 24.7 per cent of the projected figure for the entire 2008-09, but it was so since the estimated figure at the beginning of the last fiscal was much lower at 2.5 per cent of GDP.
The deficit figure was revised to much higher six per cent later when stimulus packages were announced. Ultimately, fiscal deficit turned out to be 6.2 per cent of GDP last fiscal.
In absolute terms, fiscal deficit was over Rs 20,000 crore higher than April last year.
The Centre's revenue deficit, which is in excess of current expenditure like salaries over revenue receipts, touched Rs 50,359 crore in April , about 21 per cent of what is pegged by the government for the entire fiscal.
Government's commitment to its flagship programmes like NREGA, as expressed by President Pratibha Patil in her address to the joint session of Parliament, may further expand fiscal deficit if the government allocates higher sum to these schemes than in the interim Budget.
Seeking to mollify fears of banks that high government borrowing would not allow interest rates to come down, the Planning Commission Deputy Chairman Montek Singh Ahluwalia had said fiscal deficit will be high but not in "double digits".
"I do not want to speculate on any of the Budget numbers, but I have no doubt that the central government's fiscal deficit will not be in double digits,” Ahluwalia had said.
