So far as the fiscal deficit is concerned, the government will be able to reduce it to Rs 1,33,287 crore or 2.5 per cent of GDP next fiscal, much below three per cent as per the Fiscal Responsibility and Budget Management Act.
In 2007-08, the fiscal deficit will be 3.1 per cent as per the revised estimate, against the budget target of 3.3 per cent, Finance Minister P Chidambaram said while presenting the Budget for 2008-09 in Parliament.
Excess outlay of the government on its day-to-day operational expenses, technically called revenue deficit, will also be cut to 1.4 per cent this fiscal as compared with the budget estimate of 1.5 per cent.
In the next fiscal, revenue deficit is proposed to be further reduced to one per cent of GDP. This will happen since revenue receipts of the Central Government are projected at Rs 6,02,935 crore for 2008-09 and the revenue expenditure at Rs 6,58,119 crore, Chidambaram said.
As per the FRBM Act, the government should cut fiscal deficit by 0.3 per cent a year to make it three per cent of GDP by 2008-09, while revenue deficit is mandated to be slashed by 0.5 per cent a year to eliminate it by next fiscal.
While the government will be able to meet the annual target of 0.5 per cent cut in revenue deficit next year as well, the target of eliminating it has been postponed.
"...because of the conscious shift in expenditure in favour of health, education and the social sector, we may need one more year to eliminate the revenue deficit. In my view, this is an entirely acceptable deferment," Chidambaram said.