Fiscal deficit hits 95% of estimate in 9 months

The country’s fiscal deficit — the difference between Government’s income and expenditure — crossed 95 per cent of the budget target in nine months of the current fiscal.

According to data published by the Controller General of Account, the total deficit at the end of December touched ₹5.16-lakh crore, which is 95.2 per cent of the budget estimate of ₹5.42-lakh crore.

For the common man, higher deficit means higher inflation which can translate into higher interest rates and costlier loans.

The Finance Ministry, however, is still sure the deficit will not exceed the target and would end at 4.6 per cent of GDP.

Finance Minister P. Chidambaram had announced recently that the fiscal deficit will be kept at 4.8 per cent of GDP this fiscal.

Deficit numbers are tracked by rating agencies, and any miss in the target may result in them revising the ratings.

The deficit for the nine-month period has increased as the revenue generation was lower and the expenditure was higher in comparison to the previous fiscal.

Income from taxes was 58.6 per cent of the budget estimate against 62.8 per cent during corresponding period of previous fiscal.

And, both Plan and non-Plan expenses have touched 63.3 per cent and 73.2 per cent of the budget target, respectively.

According to Aditi Nayar, Senior Economist with ICRA: “While the Centre may achieve its target of restraining the fiscal deficit to 4.8 per cent through expenditure restriction, the quality of the underlying fiscal adjustment may be suboptimal.”

“An adverse base effect due to fiscal restraint in the third quarter contributed to the pickup in revenue expenditure growth to 19 per cent in the quarter ending December from 12 per cent in the previous quarter,” Nayar added.

COMMENT NOW