New Delhi, Oct. 31: The government’s fiscal deficit in the first six months of the current financial year touched Rs 4.12 lakh crore, or 76 per cent of the budget estimate of Rs 5.42 lakh crore, lending credence to warnings given by many analysts and the RBI that it may overshoot the targeted 4.8 per cent of GDP (gross domestic product).
Last year, the deficit during the same period stood at 65.7 per cent of the budget target.
Economic affairs secretary Arvind Mayaram, however, is confident that the government will meet the fiscal deficit target of 4.8 per cent of GDP for the current financial year, banking on the expenditure control measures announced last month.
Finance minister P. Chidambaram has on several occasions reiterated that the “red line” drawn for fiscal deficit will not be breached.
Rising oil subsidies fuelled the ballooning deficit, besides the rupee’s depreciation against the dollar and a muted growth in tax collection.
The Kirit Parekh panel has proposed several drastic measures, including raising diesel prices by Rs 5 a litre and increasing the price of cooking gas, to lower the government’s subsidy burden.
However, the Assembly elections later this month and the general election early next year will prevent any drastic hike in fuel prices, which have a cascading effect on inflation. The inflation rate based on wholesale prices stood at 6.4 per cent in September, while food inflation hovered around 10 per cent.
Rising costs and dampening demand have already pulled down GDP growth to around 5 per cent in the last fiscal from 9 per cent two years back.
Revenue collection during the first six months of the current fiscal slowed to 34.8 per cent of the budget estimate of Rs 8.84 lakh crore against 38.1 per cent in the previous fiscal.
Consequently, the revenue deficit in the first six months surged to Rs 3.22 lakh crore, or 84.8 per cent of the budget estimate, compared with 75.1 per cent last year.
The fiscal deficit during 2012-13 came down to 4.9 per cent of GDP from 5.8 per cent a year earlier.
Last month, the North Block announced a series of austerity measures to cut government spending to tide itself over the deficit trouble. It asked ministries to cut spending on non-plan expenditure, excluding recurring payouts such as interest, debt paybacks, defence purchases, salaries and pensions and transfers to states, by around 10 per cent.
Other steps include a freeze on fresh appointments and purchase of new vehicles, except against cars sent to junkyards. Besides restrictions on foreign travel, curbs have been imposed on air travel. Even top officers have been asked to travel business class instead of first class.