The Telegraph
Monday , February 17 , 2014
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Success seen on deficit front

New Delhi, Feb. 16: Finance minister P. Chidambaram is expected to surprise global investors and detractors alike tomorrow by showing better-than-targeted fiscal deficit numbers, spurred by the recent spectrum auction, which will see telecom companies paying Rs 18,200 crore upfront.

Telecom leaders Bharti Airtel, Vodafone, Idea and Reliance Jio had bid more than Rs 61,122 crore for the lucrative 1,800MHz and 900MHz spectrum and will pay about 30 per cent of the money by the end of this financial year, under a deferred payment option.

Further, the government’s efforts to cut or defer expenses on military purchases, metro railways, roadways and power projects worth Rs 60,000 crore as well as get state- run companies such as Coal India, ONGC and NTPC to pay huge dividends are expected to help it to improve its budgeted fiscal deficit of 4.8 per cent of the gross domestic product (GDP) despite a shortfall in taxes and divestment receipts.

Dividend receipts from PSUs, which have already topped Rs 25,000 crore, are budgeted to fetch the government around Rs 30,000 crore this fiscal.

Officials say the actual receipts by March-end can even be higher.

PSU banks will bring in another Rs 44,000 crore as the government’s share of their profits.

While North Block officials aver that Chidambaram will manage to keep the deficit numbers under check, a UN report released this month has said, “In India, the government is unlikely to meet its target of reducing the deficit to 4.8 per cent of GDP in the current fiscal of 2013-14 since growth is below projections and the depreciation of the rupee has pushed up the subsidy bill.”

The fiscal deficit has already crossed 94 per cent of its annual target in the first eight months of the financial year, prompting credit rating agencies to warn that the country’s rating could be downgraded to junk status if it did not rein in borrowings.

The finance minister had last year said he would not succumb to spending pressures, asserting that the “red line” of the deficit target would not be crossed.

Chidambaram has also promised to be true to the fiscal consolidation policy that aims to bring down the deficit to 4.2 per cent of GDP in 2014-15.

Bid to boost economy

Chidambaram may dole out pre-poll schemes or announce cuts in indirect taxes to revive industry, which shrank 0.6 per cent in December.

He is likely to try to revive the economy and his party’s electoral prospects by announcing more funds for the rural job guarantee scheme, food security programme and minority welfare, besides health, education, roads and infrastructure projects.

Officials say with GDP growth forecast at 5.5 per cent and inflation at around 5 per cent, the fiscal deficit for 2014-15 may be contained at Rs 5.6-5.8 lakh crore that is close to 4.2 per cent of GDP, which Chidambaram has set for himself as a target despite the higher spending on various programmes.