Says will falter on fiscal responsibility, budget mgmt.
The government has, for the first time, indicated that it would be impossible to maintain in the current financial year the fiscal management track it achieved in 2010-11. Also, would falter on meeting the fiscal responsibility and budget management (FRBM) targets this year, according to the finance ministry’s mid-year analysis for the current financial year.
The document, presented in Parliament on Friday, admitted to slippages in all the FRBM requirements in the first half that ended on September 30. “The performance in the first half of 2011-12 does not comply with any of the targets in respect of the benchmark of non-debt receipts, fiscal deficit and revenue deficit,” it said.
Rule 7 of the FRBM Rules, 2004, says the government is required to take corrective measures in case the outcome of the second-quarter review shows certain things: the total amount of non-debt receipts is less than 40 per cent of the budget estimates for that year, the fiscal deficit is higher than 45 per cent of the budget estimates for that year or the revenue deficit is higher than 45 per cent of the budget estimates for that year.
The total non-debt receipts during April-September, 2011, has been 37.7 per cent, as compared to 55.6 per cent in the same period of 2010, 40.5 per cent in 2009 and 39.9 per cent in 2008.
Similarly, the fiscal deficit in the first half of 2011-12 stood at 68 per cent. The fiscal deficit in the same period of 2010, 2009 and 2008 was 34.9 per cent, 49.3 per cent and 77 per cent respectively.
On the revenue deficit parameter also, the performance is far behind the requirement during the April-September period this year. It stood at 72.2 per cent, as compared to the 2010 figure of 27.1 per cent.
The revenue deficit in the first half of 2009 and 2008 was 58.4 per cent and 141.9 per cent.
“Performance during the first half on the fiscal front poses some risks (encompassing the area of receipts as well as expenditure estimates),” according to the mid-year analysis. This, “if not addressed appropriately, may lead to slippage from the path of fiscal consolidation.”
It said that though there may not be any risk on the tax receipts front, disinvestment and telecommunication spectrum auction were faced with two major challenges. The Budget estimates Rs 40,000 crore and Rs 13,000 crore respectively for the two items. “The government is addressing these challenges so as to realise major portions of these estimated receipts,” the review said.
The finance ministry has further accepted that commitments on account of additional requirement on various subsidies would make it difficult to adhere to the total expenditure target for the current year.
“While giving due consideration to inflation, policy measures to restrict the requirement on subsidy front would be required to adhere to the fiscal deficit target.”
The review says it can’t be denied that meeting the fiscal deficit target would not be easy this year. But then, it was “determined to keep the overshooting of the 4.6 per cent budget target to as minimal as possible”.
