Finance minister P Chidambaram will present a far more buoyant picture of government finances in Budget 2008-09 than his ministry had anticipated. The good news revolves primarily around government estimates that show the final fiscal and revenue deficit figures for 2007-08 to be lower than the budget estimates.
The fiscal deficit is expected to touch 2.6% of GDP, about 90 basis points lower than the estimated 3.3%. The revenue deficit is expected at about 0.9% of GDP, 60 basis points off the 1.5% budget target for 2007-08.
The better performance will make it easier for the finance minister to achieve the target of zero revenue deficit by the end of 2008-09, the terminal year of the Fiscal Responsibility & Budget Management Act.
The optimism is based on the government fisc, which was 54.5% of the budget estimate of Rs 82,256 crore, while the revenue deficit stood at 80.5% of the estimated Rs 57,562 crore. One finance ministry source said, ?This improvement can be attributed to the rapid rise in tax collections and healthy control over expenditure.?
Up to November this year, direct tax collections have grown at over 44% and indirect tax collections have risen at about 14%. Sources said the trend would become sharper after the third instalment of advance tax collections come in by December 15.
Despite government promises to increase social sector spend, actual expenditure is expected to be within the budget estimate?a first of sorts for the finance ministry. Up to the end of October, total expenditure was pegged at Rs 3,68,902 crore. Of this, interest payments accounted for Rs 89,983 crore, which made non-plan expenditure Rs 2,69,549 crore. Plan expenditure is also on track at Rs 99,353 crore.