Govt firm on keeping fiscal deficit within 4.7-per cent goal

New Delhi, Aug 14: India is determined to keep its fiscal deficit for the current financial year within the targeted level of 4.7 per cent of gross domestic product (GDP), a senior finance ministry official said.
“Certainly we are committed to protect whatever we have projected. It will require a lot of re-ordering of priorities, which we are doing every month,” expenditure secretary CM Vasudev said. India’s gaping fiscal deficit, seen by analysts as a stumbling block to the economy attaining its full potential, widened to 5.2 per cent of GDP in 2000-01 due to lower than-expected tax revenues.

Vasudev said the government would re-assess the fiscal situation in October-November, when it revises its budget estimates, to keep its spending within budgeted levels.

“There will be some mid course correction which will be needed to re-prioritise expenditure,” Vasudev said. But four months into the fiscal year, analysts say, a slowing trend in revenue receipts, an economic slowdown and rising government spending could derail Finance Minister Yashwant Sinha’s plans to check the deficit.

Vasudev said the government was strictly monitoring the spending patterns and would “compress or increase spending where necessary”.

“It is too early at this stage to hazard any guess about where the final fiscal deficit numbers will lie,” Vasudev said. Data released for the first quarter of the current fiscal year showed that the fiscal deficit stood at Rs 42198 crore ($8.98 billion) or 36.3 per cent of the target 2001-02.

Vasudev said Sinha’s plans to increase public expenditure to reverse the economic slowdown would not involve extra spending over what has already been allocated in the federal budget.

“So there is not so much direct budgetary expenditure in that sense the plan outlay of the sectors comprise budgetary support and internal resources,” he said.

Vasudev said the government was hopeful that stepped up spending on roads, ports and the power and petroleum sectors would yield results and enable it to reverse the demand slowdown.

Several state-run firms in the power, telecoms and petroleum sector have lined up their investment plans which would be funded through budget allocations and internal resources of the firms.

“Public investment does not mean that it has to come from the budget directly. The reserves with them (state firms) is very much part of public investments,” Vasudev added.

Vasudev said it was too early to say whether the government would overshoot its borrowing target for the fiscal year.

“It is too early to say in the overall sense whether there will be any slippage, whether we will be able to contain that slippage by making some corrections internally,” he said.

-- Reuters