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  3. HSBC sees India breaching its FY14 fiscal deficit target of 4.8%

HSBC sees India breaching its FY14 fiscal deficit target of 4.8%

10 Dec 2013 Evaluate

At a time when the Centre is struggling to meet the FY14 fiscal deficit target of 4.8% of the GDP and would get this only by rolling over a chunk of payments, foreign lender HSBC sees government breaching its FY14 fiscal deficit target of 4.8% on account of slower revenue and higher expenditure in the first half of the fiscal. Even as Finance Minister P Chidambaram has been reiterating of not breaching the red line on fiscal deficit target, HSBC expects spending-revenue gap to overshoot to 5.1%.

Further, stressing that the spending will get compressed by up to 1% of GDP in the second half, HSBC highlighted that this would impact GDP growth by up to 0.5-0.7%. It noted that country’s revenue growth was slower than usual, as the government only met 35% of the target in the first half against the normal 40% and that the government was on overdrive of expenditure, exhausting 84% of the fiscal deficit target in the first half. Interestingly, even as Finance Minister has set 19.3% of the revenue growth target this fiscal, it has achieved only a little over 14% as of November.

Although, HSBC took a note of steps initiated by the government to mobilize more money through dividend payments, apart from expenditure rationalization measures, it pointed that these 'high quality steps' like diesel price deregulation though urgently required may not be politically feasible given the upcoming general elections.

So far, India's fiscal deficit touched Rs 4.57 lakh crore or 84.4% of budget estimates in the first seven months of the current fiscal, reflecting signs of stress in government finances.

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