Fiscal deficit during April-July reached 51% of the budgetary estimate of . 5.13 lakh crore, raising fears of the government breaching its fiscal deficit target of 5.1% of GDP for the current year.
The renewed concerns will discourage the Reserve Bank of India from easing monetary policy and give the rating agencies reason to carry out their threat of downgrading India's sovereign rating to junk grade.
Government's total receipts in the first four months added up to . 1.73 lakh crore, only 17.7% of the budget amount, data released on Friday showed, while its expenditure climbed to . 4.37 lakh crore, 29.3% of the budgeted amount.
This shows the slowing growth is taking its toll on revenues while government was unable to rein in its expenditure.
"The fiscal deficit number is concerning and if you extrapolate this, the number by the end of this year is bound to go haywire. The government is very likely to exhaust its budgeted fiscal deficit and will lap up more resources than expected. More G-secs will put pressure on yield," said Sunil Sinha, senior economist, CRISIL. The credit rating agency expects deficit to come in at 6.2% of GDP. Finance minister P Chidambaram has promised to set out a fiscal consolidation plan and has tasked a team of experts led by Vijay Kelkar to suggest a road map. The government is keen to avoid a situation like last year when it reported a fiscal deficit of 5.9% of GDP against the budgeted figure of 4.7%. During the same period last year the fiscal deficit was 55.4% of the budgeted amount, suggesting that the breach could be significant this year as well if corrective measures are not taken. The budget has assumed . 30,000 crore from disinvestment but nothing has been raised yet. It may also not get the . 40,000 crore from spectrum sale may sale if deferred payment option is given to telecom companies.
Non-plan expenditure was 33.3% of the budgeted but plan expenditure was only 21.9% in first four months, indicating some tightening of discretionary spending.  |
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