Govt eyeing lower deficit target of 4.2% for FY15

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SummaryThe Centre is struggling to meet the FY14 fiscal deficit target of 4.8% of the GDP

The Centre is struggling to meet the FY14 fiscal deficit target of 4.8% of the GDP and would get this only by rolling over a chunk of payments. Despite that, it would still aim for a lower deficit of 4.2% for FY15.   

As Budget discussions get under way, the government is looking at the total expenditure for FY15 to increase by 14% or Rs 2.3 lakh crore over the FY14 budget estimate of Rs  16.65 lakh crore.

Almost the whole of this increase would come from non-Plan expenditure, including subsidies, defence budgets and interest payments, rather than capital spending.

To make the 4.2% target feasible, the government would hinge on a GDP growth of over 6% next fiscal (the World Bank projected India’s GDP to expand to 6.2% in FY15).    

The Budget to be presented by finance minister P Chidambaram in February will be an interim one as parliamentary elections are to be held just in a couple of months.

However, the revenue and expenditure targets will be given for the full year.

Official sources said that since 2014 will be an election year, a new government might change the spending and revenue numbers later on. “But for now, we expect to keep the Plan expenditure around the same levels as this year's budgeted Rs 5.55 lakh crore,” the official said. This means that until a new government tinkers with them, the centrally sponsored schemes such as NREGA, IAY will receive the roughly same outlay as this year for FY15.

All the increase in spending is expected to come from non-Plan expenditure. As against Rs 11.1 lakh crore budgeted for the current year, non-Plan spending for next fiscal is likely to be around Rs 13.4 lakh crore.

For next year, the spending on food security programme is expected to be between Rs 1.3 and1.4 lakh crore.  The government also expects the subsidies on fertilizer (and to an extent on oil where the pricing reform is expected to curb the bill) to be higher for FY15, given the large amounts being rolled over from this fiscal. Moreover, the Rs 50,000-crore hike in the defence budget and Rs 40,000 crore increase in interest payments will be budgeted, sources said.

A fiscal deficit of 4.2% needs the government to draw revenue of Rs 13.5 lakh crore, compared to a budgeted Rs 10.56 lakh crore for the current year.  

Analysts said this can be a challenge since

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