India unlikely to meet fiscal deficit target: FICCIAugust 31st, 2011 - 5:07 pm ICT by IANS
New Delhi, Aug 31 (IANS) Fiscal deficit in India is likely to remain over 5 percent in the current fiscal as against the budgetary estimate of 4.6 percent, due to slippages in revenue and increased spending, industry lobby FICCI said Wednesday.
Fiscal deficit as a percentage of the gross domestic product during 2011-12 would be at least anywhere between 5.05 percent and 5.12 percent, the Federation of Indian Chambers of Commerce and Industry (FICCI) said in a report.
“This estimate, could be even higher, in case, the government is unable to stick to the budgeted expenditure target,” it said.
“While a reasonable outcome would emerge if there was revenue slippages and status quo on expenditure, the worst outcome would come about as a result of both revenue and expenditure slippages.”
Even as the absolute level of fiscal deficit is set to jump, the government may still be a benefactor of a higher level of nominal GDP, courtesy higher inflation.
This in turn will have a sobering impact on fiscal deficit as a percentage of GDP in 2011-12. According the FICCI estimates, the nominal GDP growth is likely to rise to 15.5 percent as against the budgeted nominal GDP growth 14 percent. Average inflation is likely to remain 8 percent so the real GDP growth would be around 7.5 percent.
“This will chop off 0.07 percent from fiscal deficit to GDP ratio,” it said.
During 2010-11, fiscal deficit was 5.1 percent against the budget estimate of 5.5 percent. Lower fiscal deficit was partly due to upward revision of nominal GDP growth.
For the current fiscal, the budgeted fiscal deficit of 4.6 percent is based on the premise of 9 percent real GDP growth and 5 percent inflation.
The government has admitted that it is unlikely to meet the budgeted growth and inflation targets.
The Prime Minister’s Economic Advisory Council recently lowered the real GDP growth projection at 8.2 percent.
The GDP rose 7.7 percent in April-June period, the slowest in six quarters, according to official data released Tuesday. Finance Minister Pranab Mukherjee has termed the data “disappointing.”
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