Better than projected revenues from the spectrum auction for 3G services and Broadband Wireless Access (BWA) is likely to reduce the Centre's fiscal deficit to 4.47 per cent of the GDP during 2010-11 from an estimated 5.5 per cent and curtail its huge borrowings.
"Fiscal deficit and borrowings should definitely come down, unless the government goes for a spending spree on other things," Crisil Chief Economist D K Joshi told PTI here.
Exceeding all hopes, the auction for spectrum ensured an inflow of Rs 106,336 crore to the government coffers, over three times the original estimate of Rs 35,000 crore from both the 3G and BWA spectrum auctions.
The auction for BWA spectrum ended today with successful bidders committing over Rs 38,617 crore. Earlier, the 3G spectrum auction had yielded over Rs 67,719 crore.
Internet Service Provider Infotel emerged as the only pan-India winner for BWA spectrum by committing Rs 12,872.52 crore.
Higher inflows will have positive implications for fiscal deficit, which is the difference between total expenditure and total revenue that the government meets through borrowings.
Meanwhile, Joshi cautioned that the government should be careful about its spending.
"I can't say by how much exactly the fiscal deficit will go down, but it will be below the budget figures. If this year borrowing is not tamed, then next year will be a really difficult year, as there will not be a 3G bonanza," Joshi said.
Global investment banker Barclays Capital had projected fiscal deficit to decline to 4.5 per cent in 2010-11 on the basis of the 3G auction results alone.
Barclays, however, said it does not foresee any major change in the government's borrowing calendar for the first half of the current fiscal.
"However, the chances of a second half borrowing being lower than currently projected (Rs 1.7 lakh crore) have risen significantly (after the mega success of the 3G spectrum sale)," it said.
The government has estimated its gross market borrowings this fiscal at Rs 4.57 lakh crore, most of which will come in the first half of this fiscal.
Earlier, Finance Minister Pranab Mukherjee had said revenue from the 3G spectrum auction would help in reducing the fiscal deficit.
"Of course it (3G revenue) will provide me an elbow room. Please allow me to use it in the best possible manner," he had said.
The government has projected fiscal deficit at Rs 3.18 lakh crore for 2010-11, which is 5.5 per cent of the estimated GDP.
The fiscal deficit targets had gone awry after the government provided incentives to industry to combat the impact of the global financial crisis triggered by the collapse of America's iconic investment banker Lehman Brothers in September, 2008. As part of the three stimulus packages, it cut taxes and raised public expenditure to aid the recovery.
While fiscal deficit was expected to come down to 3 per cent during 2008-09, as per the Fiscal Responsibility and Budget Management Act, it actually doubled to over six per cent. Last fiscal, it further widened to over 6.4 per cent.
