New Delhi: With the general elections just around the corner the UPA government’s vote on account will have a major red mark on its report card. The widening fiscal deficit is sure to take the sheen away from the 7.1% GDP growth amid the slowdown.
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The government’s idea was to bring fiscal deficit down to 2.5% of the GDP, from the previous year’s 2.8%. But for April to December, fiscal deficit is already 3.63% of the estimated GDP.
If the off-budget estimate spends on fertilizer and oil bonds were to be added the deficit would be 8%. If the states deficit of 3.5% were to be added the combined deficit could be as high as 11.5 per cent. But EAC says it may come to 10%. How far is the slowdown to blame?
Supplementary Demand for Grants, Oil and Fertilizer Bonds and slippage in tax collections add up to 5.4% of the GDP. The Rs 75,000 crore Farm Loan Waiver and the Rs 12,561 crore. The Sixth Pay Commission bill added weight to the already cracking government finances. And with the economic slowdown, there’s more bad news on the revenue side.
In 1991, when India went through its worst financial crisis the fiscal deficit was nearly 10% the level we see now. This was matched in 2001-02 when government had to fork out money for Fifth Pay Commission. The future only looks grim as there is no end in sight yet to the economic crisis.