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Fiscal deficit pegged at 5.1% of GDP

01 Mar 2011 Evaluate

The Centre’s fiscal deficit for the current financial year has been projected to be 5.1 per cent of the Gross Domestic Product (GDP), compared to the Budget Estimates of 5.5 per cent. Much of the improvement, however, has been on account of revision in GDP numbers. Fiscal deficit, in terms of absolute numbers, still stands higher than budgeted, in spite of the government earning Rs 70,000 crore more than estimated through the auction of spectrum for third-generation telephony and broadband wireless access.

For 2011-12, the government has pegged fiscal deficit at 4.6 per cent of GDP, an improvement from 4.8 per cent suggested by the 13th Finance Commission (FC). In absolute terms, fiscal deficit will stand at a little over Rs 4 lakh crore this financial year, compared to Budget Estimates of Rs 3.81 lakh crore, and will rise to Rs 4.13 lakh crore next financial year. Till January this financial year, the deficit had touched 2.82 per cent of GDP, which implies that the government expenditure is set to rise in the last two months.

The Centre appears to be short of the revenue deficit target suggested by FC. Compared to four per cent pegged in the Budget Estimates, revenue deficit for this financial year is now estimated to come down to 3.4 per cent of GDP. It is still higher than the 3.2 per cent the Finance Commission had wanted. For the next financial year, revenue deficit is estimated to be 3.4 per cent of GDP, far above the Commission’s suggestion of 2.3 per cent.

To finance the fiscal deficit, the government would go for gross market borrowing of Rs 4.17 lakh crore. It plans to repay Rs 74,000 crore of its past debt to keep net borrowing at Rs 3.43 lakh crore This is lower than Rs 4.47 lakh crore of gross borrowing and Rs 3.35 lakh crore of net borrowing according to revised estimates for this financial year. Besides, Rs 15,000 crore is estimated to come from treasury bills, which will take the Centre’s debt for this financial year to 44.2 per cent of GDP, against the FC’s recommendation of 52.5 per cent. The country’s nominal GDP has been projected to be Rs 89,80,860 crore for 2011-12, a 14 per cent rise over this financial year.

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