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The Government would face a stiff challenge to bring down the fiscal deficit, even as inflation would continue to remain a concern in 2011, according to FICCI's Economic Outlook Survey.
The industry body's survey that interviewed economists revealed that bringing down fiscal deficit to the project levels in 2011-12 and 2012-13 would be a challenging task as the cushion of windfall gains from 3G/BWA auction will not be there in the next two years. The situation becomes even more taxing as expenditure is expected to go up steeply on account of rising crude oil prices and the implementation of the proposed National Food Security Act.
The survey thus pegs the handling of the fiscal situation as a priority for the country in the next two years. The panel of economists surveyed believe that deficit for the 2010-11 financial year, fiscal deficit is likely to be under 5.5 per cent of the GDP. Large resources raised by the Government from 3G/BWA auction, proceeds from disinvestment, better tax collections, and decontrol of petrol prices lowering the subsidy burden are the main factors cited for this expected improvement of the fiscal situation.
The survey also cautioned that if the Government wants to maintain fiscal discipline in the coming years then it must carry forward the tax reforms agenda as well as complete the reforms initiated in the pricing of petroleum products.
Results of the FICCI Economic Outlook Survey show that inflation would continue to remain a cause for concern throughout 2011. The surveyed economists have pointed out that a structural element – of rising food prices on account of continuously increasing food demand - has been built into inflation and dealing with this situation requires more effective supply side measures.
The survey suggests that to bring food inflation under control, the Government should focus on enhancing overall agriculture production and agri-productivity levels.
FICCI's Economic Outlook Survey also predicts that GDP growth of 2010-11 is likely to be at 8.7 per cent, agriculture and allied activities will grow at 4.4 per cent while industrial growth is likely to be around 8.6 per cent. The survey pegs the fiscal deficit at around 5.3 per cent of the GDP and the WPI inflation rate to be at 7 per cent.
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