Although finance minister Yashwant Sinha had repeatedly expressed his desire to adhere to the parameters laid down in the Bill, the officials told The Financial Express that the ministry would go in for a realistic target.
The provisions of the Bill, which was introduced in Parliament in December 2000, were likely to be significantly watered down in view of the recommendations of the standing committee of Parliament which opposed adoption of a doctrinaire approach on the crucial subject.
Mr Sinha, in his Budget for 2001-02, tried to reduce fiscal deficit to 4.5 per cent (0.2 per cent was later added on account of commitment to Railway Budget). However, the fiscal deficit for the current financial year is set to be much higher because of various reasons.
Although, Mr Sinha, in a bid to contain fiscal deficit fixed ambitious revenue realisation and disinvestment targets for 2001-02, the economic slowdown took its toll on the budgetary arithmetic. The ministry officials said that poor revenue collection in the current financial year and less than expected gross domestic product (GDP) growth would push the fiscal deficit to a much higher level than the Budget estimate of 4.7 per cent of GDP and the FRBM BIll target of 4.5 per cent. GDP, as per the Central Statistical Organisation (CSO) is estimated to grow by 5.4 per cent as against the the ministrys expectation of around 6 per cent.
The officials argued that with limited scope for a substantial improvement in tax collections in the next financial year and the requirements of capital expenditure in selected areas to reverse the ongoing economic slowdown, it would be difficult to fix a lower fiscal deficit target for 2002-03.
FRBM Bill 2000 has envisaged reduction of fiscal deficit to 2 per cent of the estimated GDP within a period of five financial years beginning from the initial financial year on April 1, 2001, and ending on March 31, 2006.
The Bill says, Reduce fiscal deficit by an amount equivalent to one-half per cent or more of the estimated gross domestic product at the end of each financial year beginning April 1, 2001. It also asked for a reduction in revenue deficit to nil within the same time-frame of five financial years. However, sources said the sluggish tax collection was proving to be a dampener in the efforts to reduce revenue deficit.
They added that with the tax collection target for 2000-01 going awry and 2001-02 tax mop-up set to witness a huge shortfall from the Budget estimate, the revenue department was taking extra care to fix a realistic target for 2002-03. There is little scope to project an inflated tax realisation growth target for the next financial year, according to them.
The actual tax collections in 2000-01 had fallen short of the revised estimate of Rs 1,98,321 crore by around Rs 10,000 crore. The sources said that in the current financial year, the latest tax mop-up figures suggested that it would be difficult to reach even the revised estimate of previous fiscal.
This would mean a huge shortfall of over Rs 25,000 crore from the Budgettarget of Rs 2,26,649 crore in the current fiscal.