FinMin says fiscal and revenue deficits to be reined in by FY'15

Sat, Nov 7 06:47 AM

Setting a new timeline for consolidation, the finance ministry has projected that it will be able to wipe out revenue deficit and rein in fiscal deficit at 3 per cent of the gross domestic product only by 2014-15. The estimates bank significantly on the economy staging a smart recovery the next financial year and handsome gains from non-tax receipts such as disinvestment and auction of natural resources such as telecom spectrum.

According to government officials, the projections may form part of a new Fiscal Reforms Legislation that the Vijay Kelkar-chaired Thirteenth Finance Commission (TFC) will provide inputs for. The new targets will be concomitant to the award of the TFC that is likely to submit its report before December end this year. The TFC award will be applicable for five years beginning 2010-11.

Officials said as of now there was no clear strategy for any meaningful pruning of subsidies that form part of the non-Plan expenditure, which anyway is sticky. The other two meaty components of non-Plan expenditure are interest outgo and defence spend. Besides, the finance ministry expects petroleum and fertiliser products to remain soft, to suggest the subsidy regime would continue.

The global economic crisis and consequent powering down of the Indian economy had forced the government to announce a series of stimulus measures. The fiscal stimulus provided to mitigate the impact of the crisis amounted to about Rs 1,86,000 crore or about 3.5 per cent of the GDP. This resulted in fiscal deficit shooting up to 6.8 per cent as estimated in Budget 2009-10.

The Fiscal Responsibility and Budget Management Act (FRBM) of 2004 had specified that the government will cut fiscal and revenue deficits every year by 0.3 per cent and 0.5 per cent of the GDP, respectively such that they reached the targeted level of 3 per cent and 0 per cent by 2008-09. However, with growth becoming an over-riding concern in 2008-09, the government could not stick to the targets. In 2008-09, the actual fiscal deficit was 6.2 per cent of the GDP against the Budget estimate of 2.5 per cent of the GDP.

Officials said the finance ministry was bullish on growth prospects over the next five years. Finance minister Pranab Mukherjee has already said he expected the economy to bounce back to 9 per cent levels by 2011-12. This will perk up revenues that could grow 24-25 per cent a year as it did during from 2005-06 to 2007-08, when the economy grew an average 9 per cent a year. Officials said 3G auction could yield Rs 30,000 crore and a sustained stake sale programme could fetch Rs 20,000 crore a year based on the estimates of the Economic Survey 2008-09.

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