Fiscal deficit may touch 5.12% this fiscal: Ficci

Fiscal deficit may touch 5.12% this fiscal: Ficci

New Delhi: Declining revenue growth and rising expenditure may push up the fiscal deficit during the current financial year to 5.12%, against the target of 4.6% of the GDP, industry body Ficci said on Wednesday.

Fiscal deficit is the gap between overall expenditure and receipts.

Containing expenditure growth at 3.4% for 2011-12 will be difficult given that trend estimates reveal expenditure growth at 20% for the five-year period ended March 2011, it said.

“There is also the possibility of an even worse outcome, in which case the projected fiscal deficit target could be even higher than 5.12% of GDP," it said, adding the lurking fear of expenditure overrun gets more real considering among others, the case of subsidies.

The government is aiming to restrict its fiscal deficit to 4.6% in the 2011-12, from 4.7% last year.

There is a large upside risk to the budgeted amount of fertiliser subsidy as fertiliser input prices have increased significantly in the recent months, it said, adding that food subsidies may be also higher, given the introduction of National Food Security Bill.

“Taking all these factors and the recently released data on fiscal trends, it may be thus improbable to contain expenditure growth at the budgeted 3.4%," the analysis said.

The government’s fiscal deficit surged more than two-fold to 2.2 lakh crore during the first four months of the current fiscal, on account of low revenue realisation and higher expenditure.

The deficit was 90,915 crore in April-July period of 2010.

“Based on robust scenarios...the fiscal deficit as a percentage of GDP during 2011-12 would be at least anywhere between 5.05%and 5.12%, against the budget estimate of 4.6%...This estimate, could be even higher, in case, the government is unable to stick to the budgeted expenditure target," it said.

However, it said that the good thing is that even as the absolute level of fiscal deficit is set to jump, the government may still be a benefactor of a higher level of nominal GDP, courtesy higher inflation.

“This in turn will have a sobering impact on fiscal deficit as a per cent of GDP in 2011-12," it added.