Budget 2009: Fiscal deficit to widen to 6.8 pct

Font Size

Print

Feedback

Email

Discuss

Related Articles

Budget addressed stimulus needs: MontekIndian budget brings ‘hope and change’: HindujasRealty sector unhappy with BudgetLife saving drugs, LCD TV cheaper

New Delhi: The Centre's fiscal deficit is estimated to be 6.8 per cent of GDP in 2009-10 against the low of 2.5 per cent projected for the previous fiscal a year ago, as expenditure is expected at over Rs 10 lakh crore and tax collection can take a hit due to stimulus packages.

Expressing concern at the rising fiscal deficit, Finance Minister Pranab Mukherjee said in his Budget speech that the government will come back to the path of fiscal consolidation at the earliest.

"I intend to ... return to the FRBM target for fiscal deficit at the earliest and as soon as the negative effects of the global crisis on the Indian economy have been overcome," he said.

The fiscal deficit was originally estimated at 2.5 per cent of GDP for 2008-09 but widened to 6.2 per cent after the government cut excise duty rates by 6 per cent and service tax by 2 per cent and increased planned outlay to spur the economy, slowing due to the global financial crisis.

For the current fiscal, the government retained the tax cuts but increased plan expenditure, particularly for the infrastructure sector, by 34 per cent year-on-year and non-plan outlay by 37 per cent due to a higher interest burden on account of more market borrowing.

A further rising fiscal deficit will necessitate more market borrowing and again increase the interest burden, which will become a cycle.

The government's gross tax receipts are projected to come down to Rs 6.41 lakh crore this fiscal compared to Rs 6.87 lakh crore in 2008-09. But overall expenditure is projected to rise to over Rs 10 lakh crore against over Rs 9 lakh crore in the last fiscal.

The government estimated a fiscal deficit of 5.5 per cent of GDP for the current fiscal in the Interim Budget.

Mukherjee had announced the third stimulus package comprising a 2 percentage point cut each in service tax and excise duty in reply to a debate on the Interim Budget. This itself had raised the fiscal deficit projection by 0.5 percentage points to 6 per cent.

The Fiscal Responsibility and Budget Management Act had mandated the government to bring down the fiscal deficit by 0.3 percentage points each year so that it is pruned to 3 per cent of GDP by 2008-09.

With the time period for the FRBM targets coming to an end, the government has given the task of new targets to the 13th Finance Commission.