Finance minister P Chidambaram is indeed walking his talk on the fiscal front. The Centre's fiscal deficit during the April-December period stood at R4.04 lakh crore ($76.22 billion) or 78.8% of the Budget Estimate (BE) of Rs.5.14 lakh crore, according to data released by the Controller General of Accounts (CGA).
During the same period in the previous fiscal, the deficit was at 92.3% of the budgetary target.
The improvement has been brought about by a strict tightening of the expenditure since September and some fruition of the efforts to arrest the fall in tax revenue growth. The government is aiming to contain fiscal deficit at 5.3% of the GDP during current fiscal, despite a difficult economic environment that has resulted in less than anticipated level of growth in tax and non-tax revenue.
Higher than expected subsidy bill coupled with lower revenue collections resulted in the government reporting a deficit of 5.9% of GDP in 2011-12, sharply higher than 4.6% projected. Forced to check the high deficit, the government budgeted a fiscal deficit of 5.1% for the current year but now hopes to contain it at 5.3% and at 4.8% in 2013-14.
The latest data signal the need for further aggressive measures to meet the revised target to reduce the fiscal deficit to 5.3% of the GDP, including a focussed push to disinvestment. Deferment of a greater part of the subsidy burden to the next year and a continued leash on capital expenditure are also likely.
The Budget had estimated a GDP growth of 7.6% but the economy expanded by just 5.4% in the first half, and the finance ministry has recently projected the growth for the full year at 5.7-5.9% even as it pinned hopes on a likely “confidence-inducing Budget” and further reforms initiatives.
Net tax revenue for April-December was Rs 4.84 lakh crore (or 62.8% of the target as against 63.3% last fiscal) while the total expenditure (Plan and non-Plan) was around Rs 9.91 lakh crore (or 66.5% of the target as against 71.3% last year).
Finance minister P Chidambaram who recently went on a four country tour to woo investors to have confidence in India's growth story has repeatedly asserted that under no circumstances he would allow the Centre's fiscal deficit to breach the revised target of 5.3% of GDP for the current financial year.