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Montek Singh Ahluwalia (right) in New Delhi on Tuesday. A Telegraph picture
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New Delhi, Sept. 18: Planning Commission deputy chairman Montek Singh Ahluwalia today said India was likely to overshoot its fiscal deficit target as growth had fallen short of initial estimates.
“The fiscal deficit target of 5.1 per cent of gross domestic product (GDP) was set when the government was expecting the economy to grow around 7.5 per cent in this fiscal,” Ahluwalia said at an industry event here today. “But we know growth is going to be less than that, may be 6.5 per cent. For that reason alone, fiscal deficit will widen.”
Yesterday, finance minister P. Chidambaram had also expressed doubts about meeting the deficit target. “India would be lucky to meet a target to keep the fiscal deficit at 5.1 per cent of GDP.”
He had said the government would unveil more measures to cut expenditure and keep deficit close to the budget estimates.
The planned steps will be in addition to a hike of Rs 5 per litre in diesel prices last week. The move is expected to stoke inflation in the near term but stabilise it over a longer period. The price rise will also help to lower the government’s subsidy burden.
Many economists expect the deficit to widen to as much as 6 per cent of GDP from 5.75 per cent last fiscal and put the blame on the Centre’s failure to cut down on spending.
Ahluwalia said, “From the economic point of view, our diesel prices are lower than our neighbouring nations. If we continue with this (subsidy on diesel), then either our oil companies will be bankrupt or our fiscal deficit will increase so much that we will have to cut plan expenditure on health and education.”
According to him, aligning domestic fuel rates with global prices is necessary to achieve rapid economic growth and ensure efficient use of energy sources.
He said it was necessary to cut diesel subsidy as it was not going to the needy people but to those “who are driving cars”.
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