In a bid to stay close to the budgeted fiscal deficit target of 5.1% for 2012-13 and to prevent the possiblity of a downgrade of its ratings, the government on Thursday had decided against crossing its borrowing target for this financial year.
However, economic affairs secretary Arvind Mayaram indicated that the government could end up with a slightly higher fiscal deficit of 5.2-5.3% this fiscal. Mayaram also said that though the option for a fresh borrowing announcement later always exists, the government does not expect to exercise that choice.
He said the government expects to net around R25,000-30,000 crore from PSU disinvestment and R40,000 crore from the spectrum auction. Wasteful expenditure, if any, will be strongly curbed and, therefore, we are confident that we will be able to come pretty close to our fiscal deficit target... We are cognizant of the fact that there could be a possibility (of wasteful expenditure)... we will be watchful, he said.
The official said, We are expecting that we will be able to come very close to our fiscal target if we are prudent in our expenditure where all important critical expenditure commitment will be fully met.
The fiscal deficit was 5.8% of the GDP in 2011-12. During April-August last fiscal, the fiscal deficit had reached 66.3% of the budgeted amount.
The net tax revenue during April-August this fiscal was R1.75 lakh crore, while the total expenditure was around R5.65 lakh crore.
The deficit is primarily financed through domestic borrowings, which stood at R2.92 lakh crore during the April-August period. This is 60% of the total estimated borrowings of R4.88 lakh crore in 2012-13.
DK Joshi, senior director and chief economist at the ratings agency Crisil, told FE that the pressure on the fiscal deficit side is building up primarily on account of the fuel subsidy. The ratings agency expects the fiscal deficit to touch 6.2% of GDP this fiscal, and it incorporates a 10% increase in fuel prices, he said.
In an attempt to narrow the fiscal deficit by reducing subsidies, the government had recently hiked diesel prices. Joshi said he expects another round of fuel hike soon.