Expressing concern over the state of government finances, the Prime Minister?s Economic Advisory Council (EAC) said the government?s revenue deficit is unlikely to be eliminated by 2008-09, not in line with the government?s commitment to Parliament.
In its Economic Outlook for 2007-08 released on Monday, it said, ?The Centre?s revenue deficit continues to be high due to rising government expenditure.? There are also off-budget liabilities aggregating 2% of GDP, and potential expenditure increase after the Sixth Pay Commission makes its recommendations, it said. This is likely to further push the government expenditure.
The government?s fiscal deficit is estimated to be 3.3% of the GDP; its revenue deficit will stand at 1.5% of the GDP in 2007-08. According to Fiscal Responsibility and Budget Management Act, the government had set a target of bringing the revenue deficit to zero by 2009. It, however, noted that the aggregate fiscal deficit of the Centre and states in 2007-08 is likely to be 5.2% of the GDP, lower than the estimated 6.3% of GDP in 2006-07. This would be mainly because states have been able to reach their mandated targets ahead of schedule. States are expected to have a revenue surplus 0.39% of the GDP this fiscal. ?Overall, there has been considerable progress towards fiscal consolidation,? it noted.
The report has once again underlined the need for the government to rein in its expenses. The Economic Survey released earlier during the year had also warned against wasteful spending saying the process of fiscal consolidation might not be sustained without a curb on expenditure.
It had pointed out that deficit was being lowered mainly due to high tax collections and the benign interest rate.
The issue has also been taken up by finance minister P Chidamabaram, who has taken a number of measures to control expenditure. Chidambaram?s emphasis on thrift in the recent past has also put him at loggerheads with the Planning Commission, when he refused to shift the FRBM goals by two years to generate additional funds for the Eleventh Plan. The government?s expenditure management, careful monitoring of outcomes of outlays and targeting of subsidies, however, remains an unfinished task.