New Delhi: Global financial services firm Goldman Sachs on Tuesday said gas production from the Krishna Godavari basin D-6 gas field by end-March 2009, would help in reducing India’s fiscal deficit and is also likely to provide “some downside protection” to economic growth rate.
“We believe the increased gas supply will improve somewhat the current account and fiscal deficits and provide some downside protection to GDP growth,” Goldman Sachs said in a research report.
India’s fiscal deficit is projected to more than double to 6% of GDP this fiscal against the budgetary target of 2.5%.
For the next fiscal, the deficit is estimated to be 5.5% of GDP.
It added though the immediate benefits to the macro-economy are limited, it would provide positive news in an environment of negative external shocks and investment slowdown.
The report added that gas production would increase the power generation capacity and is likely to lead to investments in the gas transmission and distribution infrastructure of over $10 billion (about Rs50,000 crore) in the next five years.
Goldman further expects the gas production to substitute about 7% of oil consumption in 2009-10 and 10-11% over fiscal years 2011-1014.
“According to our estimates, the total import bill could fall by 1% in FY’10 and an average of 3% during FY 2011-14,” it added.
The gas production is likely to provide more revenue to the government that would increase over time as input cost is expected to come down.
“We estimate that the direct impact of this on revenues will be in the order of 0.1% of GDP in FY’10, but increase to nearly 0.2% over FY 2011-FY14,” it said.