Government will stick to fiscal deficit target of 4.6% for 2011-12: Finance Minister

Despite the 30% surge in the fiscal deficit for the first two months of the current financial year, government will stick to fiscal target of 4.6% of GDP for the current fiscal year. Finance Minister Pranab Mukherjee said, ‘government will stick to the fiscal deficit target of 4.6 per cent of GDP for 2011-12 despite huge revenue sacrifice due to duty cut on petroleum products’.

In June, government hiked the prices of diesel, kerosene and domestic cooking gas by Rs 3/liter, Rs 2/liter and Rs 50 per cylinder, with this price hike, it has also removed duties on crude oil and its products to keep the price hike as minimum as possible, this decision of slashing excise and custom duties on crude oil product had cost around Rs 49,000 crore to the government.

This huge revenue sacrifice by government is expected to have negative impact on government’s fiscal deficit. On the other hand, denying impact on fiscal deficit, finance minister said, 'I don't think so because we are still trying to keep the target.' He further added that the fiscal deficit would ultimately depend on final analysis based on revenue receipt and expenditure. 'But just now we need not rush to any conclusion,' finance minister added.

However, since the rate cuts take effect for the remaining three quarters only, including the share of states, the total revenue loss will be around Rs 35,000-36,000 crore for the present financial year. Earlier, the government has expressed its anxiety over plunge in revenue collection, direct and indirect taxes, for the current fiscal year due to moderation in pace of economy’s expansion on account of instability in international commodity prices and high inflation.

During April-May 2011, government’s fiscal deficit increased by 30% to 1.30 lakh crore from 1 lakh crore in the first two month of last fiscal year. This sharp 30% surge in fiscal deficit is due to moderation in revenue collection, the tax revenue fell by 28% and the non tax receipts fell by more than 55 % in the April-May to Rs 5,613 crore from Rs 12,761 crore in corresponding period of last year.