FRBM rules require the government to restrict revenue deficit to 45% of BE at the end of the second quarter. Finance minister P Chidambaram will, hence, be required to make a statement in both the Houses of Parliament in the forthcoming session explaining the corrective measures he will take.
The main reason for high revenue deficit is low tax realisation. Revenue receipts in the first half stood at Rs 1,06,507 crore which was 34.4% of the budget estimates. The same figure at the end of September 2003 was 37%.
The Centre has, however, kept a tight leash on expenditure in the first half. Total spend was Rs 21,528 crore or 10% lower than the corresponding period last fiscal. Further, the fiscal deficit, in absolute terms, was 34% lower at Rs 53,525 crore.
Total receipts were down to 41.8% of the budget estimate compared to 47.7% during the corresponding period last year.
The government, as per the FRBM Act, is also required to reduce revenue deficit by 0.5% of GDP by the end of the current fiscal. This appears a tall order in view of the high revenue deficit incurred in the first half of 2004-05. u
As far as fiscal deficit is concerned, the government has been able to restrict it to Rs 53,235 crore or 38.7% of the budget estimate at the end of September. FRBM stipulated a limit of 45% at the end of the first half of the fiscal.
As far as expenditure is concerned, the government has been able to keep it under check. Total expenditure in the first half worked out to Rs 1,95,573 crore which was 41% of the target, down from 50% recorded at the end of September 2003.