Fiscal deficit reaches 66.3% of budgeted estimates in April-August 2011

Country’s external debt touched 66.3% of the budgeted estimates in the first five months of current financial year. This increase in external debt has raised concerns that the government may not be able to meet the fiscal deficit target for the current financial year. For the current financial year, the government has pegged its fiscal deficit at 4.6% of the gross domestic product (GDP), compared to 5.1% in last year.

As per the government auditor, the Controller General of Accounts, the deficit for the April-August 2011 stood at $56 billion or Rs 2.73 trillion. During the same period of last fiscal year, the gap between the government’s expenditure and revenue was just 39.7% of the budget estimates. However, the government is of the view that it is too early to conclude that the deficit would increase, it has asked all ministries to refrain from seeking funds for new schemes other than those were announced in the budget.

On September 29, the government had announced that it will borrow around Rs 53,000 crore more from the market. The Finance Minister Pranab Mukherjee said 'it is too pre-mature to say that there would be adverse impact on fiscal deficit...we have to borrow Rs 53,000 crore to ensure that there is an uninterrupted cash flow'. By adding further he said as far as fiscal deficit is concerned we shall have to consider various other factors.

The finance ministry has asked all ministries and governmental agencies to refrain from seeking money for non-budget schemes, unless it is unavoidable, whereas submitting proposals for the second batch of supplementary demands for grants that will be presented to the Parliament in the winter session.

Along with the government the experts from the private sector are of the view that the, it is too early to predict how the expenditure side would behave as the spending tends to be lumpy. As of now, there have been no significant slippages. Historically, the trend indicates that the government has spent more in the first half of year compared to second half.  The latest figure shows that the expenditure was 37.5% of the budgeted amount as compared to 40.4% last year.
 
Earlier, the RBI said that the fiscal consolidation was also needed to control inflation and that monetary measures alone would not be sufficient. However, experts are of the view that meeting the fiscal target of 4.6% of GDP would be difficult for the government, given the current slowdown in global as well as on domestic front. The revenue collection has been much lower than the budgeted estimate. It has been around 23.9% of the budgeted estimates from 42.6% of last year.