The Hindu Business Line : Centre on course to meet fiscal deficit target, say economists

Economists are confident that the Centre would meet its fiscal deficit target, which has been pegged at 3.3 per cent of GDP for 2007-08, even as some see the revenue deficit overshooting the target.

They also see more pressure points on expenditure emerging next year while noting that the Government has lined up a slew of off-Budget commitments such as oil bonds, Market Stabilisation Scheme bonds and bonds for meeting capital requirements of State Bank of India.

The latest data released by the Controller General of Accounts shows that fiscal deficit has hit Rs 82,256 crore in the first seven months of the current fiscal, representing 54.5 per cent of the Budget estimate of Rs 1,50,948 crore for 2007-08.

In the same period last year, the fiscal deficit stood at Rs 81,000 crore, representing 58.6 per cent of the Budget estimate of Rs 1,48,686 crore.

“This year the fiscal deficit target might be met. But I am concerned about the revenue deficit, which is likely to overshoot the target going by the current trend and the off-Budget commitments. We are broadly on target in meeting the fiscal numbers this year,” Mr Rajiv Kumar, Director and Chief Executive of ICRIER, told Business Line.

The Centre’s revenue deficit up to end-October 2007 stood at Rs 57,562 crore, which represented 80.5 per cent of the Budget estimate of Rs 71,478 crore for 2007-08. In April-October 2006, the revenue deficit stood at Rs 67,299 crore, representing 79.4 per cent of the Budget estimate of Rs 84,727 crore for 2006-07.

Fiscal numbers on track

“This year the fiscal numbers are on track. Direct taxes are doing exceptionally well. Indirect taxes have trailed behind targeted growth rates.

“Revenues are buoyant on the strength of direct taxes. The fiscal deficit target of 3.3 per cent of GDP would be met.

“But I see some pressure points on expenditure next year. New fiscal stress points are emerging,” Mr D.K. Joshi, Principal Economist, Crisil, said.