New Delhi, Dec 3: The government is worried about a runaway fiscal deficit which could upset its budget calculations.
Finance secretary S. Narayan today frankly told newspersons here, “We are worried about the fiscal deficit.” The fiscal deficit at the end of six months was Rs 57,746 crore. But by October or just after one more month, it had surged to over Rs 69,000 crore.
Narayan said bluntly it would be difficult to scale down expenditure which is one way of reducing the deficit, the gap between the government's earnings and expenses.
“There are four main elements in our expenditure — interest pay-outs, plan support, subsidies and defence expenses. Most of them are rigid in nature,” he said.
While in past years, the finance ministry has been able to marginally contain deficits by slyly saving on plan expenses, this year the Cabinet which wants to spend its way out of the recession is dead against curbing expenditure on development projects like dams, power lines, roads, schools and other social and economic infrastructure
Non-Plan expenditure most of which go into interest pay-outs, salaries, wages, pensions besides defence expenses have been burgeoning. At the end of six months it stands at Rs 120,165 crore, nearly Rs 13,000 crore more than the bill in the first half of 2001.
Tax collections at the end of six months has, however, been just 35 per cent of the budgeted collections for the year. This has seen the revenue deficit rising by 9.1 per cent in the first half of this fiscal compared with the corresponding period last year.
With the economy projected to grow at a pace slower than before because of near drought in north India, slower recovery abroad (which drives demand for Indian exports), oil price hikes and fears of war in West Asia, excise and customs collections which make the bulk of tax revenues is sure to fall short of projections.
Narayan is not willing to admit as much, claiming diplomatically that it still too early to talk about revenue collections.
The finance ministry has also conveniently glossed over two other potential expenditure elements which could upset budget calculations — a Rs 14,000 crore bailout guarantee the government has taken on for the ailing UTI and a Rs 6,000 crore drought relief package, promised by Prime Minister Vajpayee. Both of which will add up to unforeseen expenses which could jack up the fiscal deficit.
That the deficit is rising is indicated by another fact — the government has already borrowed Rs 110,032 crore or 77 per cent of the budgeted amount in the first six months of this fiscal itself. Credit rating service Standard and Poor's has already downgraded India's rating partly because of the instable fiscal deficit. Various other global credit rating agencies including Moody's and Fitch have already warned that they may downgrade India’s internal debt rating.