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6.4% fiscal deficit likely
P Vaidyanathan Iyer & Subhomoy Bhattacharjee in New Delhi |
January 02, 2003 19:14 IST
The central government is likely to end the current financial year with a fiscal deficit of at least 6.4 per cent of the gross domestic product.
The 2002-03 Budget had estimated the deficit at Rs 1,35,524 crore (Rs 1,255.24 billion), or 5.3 per cent of the GDP.
The ballooning fiscal deficit will be due to the combined effect of a Rs 25,500 crore (Rs 255 billion) shortfall in receipts (including divestment proceeds shortfall of Rs 7,000 crore or Rs 70 billion) and additional expenditure of at least Rs 11,000 crore (Rs 110 billion).
After budgeting for savings, which are unlikely to be more than Rs 6,500 crore (Rs 65 billion), the government will end up with a deficit of 6.3 per cent of the GDP.
According to the revenue department, direct tax collection will be short of its Rs 91,140 crore (Rs 911.40 billion) target by at least Rs 11,000 crore.
With just three months to go for the fiscal to end, the government has managed to realise just over 50 per cent of its target.
Officials of the Central Board of Direct Taxes (CBDT) said the 32 per cent growth budgeted in direct tax this year over the actual collection of Rs 68,803 crore (Rs 688.03 billion) was not possible.
On the indirect tax front, the government is likely to fall short of the budget estimate by Rs 7,500 crore (Rs 75 billion), which includes Rs 1,500 crore (Rs 15 billion) lower realisation from service tax.
The impact of sparing life insurance premiums from the 5 per cent service tax would itself cost the Centre Rs 1,125 crore (Rs 11.25 billion), officials said.
While the government saved about Rs 10,000 crore (Rs 100 billion) in 2001-02, this year might not be the same, finance ministry officials said.
The two Supplementary Demands for Grants have added about Rs 9,000 crore (Rs 90 billion) to the government's expenditure. The drought is also expected to entail a spend of at least Rs 2,000 crore (Rs 20 billion).
This year, re-orientation of Plan expenditure will save the government about Rs 2,500 crore (Rs 25billion), and savings on interest are likely to be about Rs 4,000 crore (Rs 40 billion).
What will make a difference though is the debt-swap programme which can enable the Centre to show additional capital receipts of about Rs 10,000 crore as loan recovery from states, which will help rein in the deficit to 6 per cent of the GDP.
This will, however, be incumbent upon the states willing to part with 20 per cent of their small savings for pre-paying high-cost debt and the Centre allowing them additional market borrowings to replace such old debt with fresh borrowings carrying lower interest rates.
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