With a sharp drop in the pace of tax collections and a spike in subsidy bills, the Reserve Bank of India (RBI) today said the government would find it hard to stick to deficit targets for the current financial year.
In a review of the central government's finances for April-September, RBI said it would be challenging to anchor the key deficit indicators within the budget estimates for 2011-12.
The Centre had envisaged the continuation of further progress towards fiscal correction through a sharp reduction in expenditure growth, while keeping a conservative stance on revenues.
The tax revenue growth remains far below the budgeted growth, reflecting not only a significant amount of direct tax refunds, but also a slowdown in indirect tax revenues.
Moderation in economic growth and changes in duty structure on petroleum products in June may also have hit tax revenues.
The expenditure growth has overshot the budgeted growth, primarily owing to non-Plan expenditure. Consequently, fiscal and revenue deficits were much higher in the first half than estimated earlier. This is even after adjusting for a higher-than-budgeted spectrum receipts from the first half of 2010-11.
While the Centre's expenditure growth during April-September remained lower than a year ago, strong upside pressures are evident from subsidies.
