While fiscal deficit would come down to 3% in 2008-09 as expected under the FRBMA, it has, however, said revenue deficit might not be eliminated by the end of the next fiscal.
A lower fiscal deficit will result in a reduction in the real domestic long-term interest rate of the economy, the Survey tabled in Parliament by finance minister P Chidambaram said. In the short term, lower fiscal deficit lead to a fall in supply of government securities and subsequently decline in interest rates in the domestic economy.
The report has also stated that fiscal deficit targets and revenue for 2007-08 are on course. Based on the revised gross domestic product (GDP) figures, fiscal deficit may be a shade lower at 3.2% of the GDP than the budgeted 3.3% of the GDP and revenue deficit would be at 1.5% of the GDP. Meanwhile, tax revenue has risen at a rate of 20.5% in 2007-08, leading to a tax-GDP ratio of 11.7% (based on revised GDP estimates), the Survey said.