Fiscal deficit to decline to 5.2% in 2010-11: PMEAC

Fiscal deficit to decline to 5.2% in 2010-11: PMEAC

New Delhi: Higher economic growth will help the government reduce fiscal deficit to 5.2% of the GDP during 2010-11 from 5.5% estimated earlier, said the Prime Minister’s Economic Advisory Council (PMEAC) on Monday.

“The budget estimate of the central government’s fiscal deficit relative to GDP is estimated at 5.2%...," the Council said in its ‘Review of the Economy 2010-11´ report released today.

It said that due to the upward revision of GDP estimates, the estimated fiscal and revenue deficits are going to be marginally lower than originally projected.

According to the report, the economy is expected to witness an overall growth of 8.6% this fiscal, against the earlier estimate of over 8%. The economy expanded by 8% in 2009-10.

Finance minister Pranab Mukherjee in the last budget had pegged the fiscal deficit, which is the difference between total expenditure and revenue, for 2010-11 at 5.5% of the GDP.

The fiscal deficit in 2009-10 soared to 6.3%, mainly on account of the stimulus provided to the industry to combat the impact of the global financial meltdown.

The PMEAC further put the consolidated fiscal deficit of central and state governments at 8% for 2010-11. This is at par with earlier estimate of 7.5-8%.

The advisory council said that while the current year’s fiscal adjustment may not be a problem, the government faces formidable challenge in conforming to the Finance Commission’s targets in the medium term.

According to the targets set by the Finance Commission, the central government is required to reduce its fiscal deficit to 3% of GDP by 2014-15.

The centre’s fiscal deficit narrowed by 44.75% year-on-year to Rs1.71 lakh crore during the first three quarters of the current fiscal on the back of better-than- expected revenue from the sale of spectrum and robust tax collections.

The central government’s fiscal deficit had stood at Rs3.10 lakh crore in the corresponding period FY10.

At Rs1.71 lakh crore, the fiscal deficit in April- December, 2010, amounted to 44.9% of the Budget estimate of Rs3.81 lakh crore for the entire 2010-11.

The government collected Rs3.91 lakh crore in taxes during the nine-month period, which was 73.2% of the budgetary target for the entire fiscal.

Furthermore, non-tax revenue in April-December, 2010, stood at Rs1.93 lakh crore, higher than the Budget estimate for the entire fiscal, primarily on account of higher realisation from the auction of 3G spectrum, which raked in approximately Rs70,000 crore more than the government estimated.