FM sees 12% nominal GDP growth in FY06

Government today projected a 12% nominal growth but admitted that it will not be able to meet FRBM target of reducing fiscal deficit by at least 0.3% and revenue deficit by 0.5% in 2005-06.

"A 12% nominal GDP growth has been assumed for next fiscal," finance minister P Chidambaram said but declined to give the real GDP growth projection.

According to analysts, the real GDP growth would work out to about 7% if inflation is contained at 5% in 2005-06.

A 12% GDP growth will mean a national output of Rs 35,14,977 crore in the next fiscal.

On a query on why the budget has not stuck to the FRBM target of fiscal deficit, Chidambaram said "We will fall short of the FRBM target because of the implementation of 12th Finance Commission recommendation.

"In a transition year, we will have lot of stress. We will have a pause in 2005-06. Hopefully, from 2006-07, we hope to comply with the frbm fully," Chidambaram said at a post-Budget press conference.

Fiscal deficit has been pegged at 4.3% of GDP in 2005-06 as against 4.5% in this fiscal while revenue deficit has been retained at the same level of 2.7%.

Centre was expected to take a hit of Rs 26,000 crore for implementing the finance panel's recommendation of higher tax share, debt relief and additional grants to states.