Finance Commission gives new roadmap for fiscal deficit

Finance Commission gives new roadmap for fiscal deficit

New Delhi: With stimulus measures forcing the government to go way off its self-imposed fiscal discipline targets, the 13th Finance Commission has laid down new targets for fiscal and revenue deficits.

According to the deficit roadmap in the report of the Finance Commission, which primarily advises on revenue sharing between Centre and states, fiscal deficit is targeted to be brought down to 3% by 2013-14 from around 6.8% this fiscal, while revenue deficit is to be eliminated by the same year from around 4.8% level this fiscal.

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As per the earlier Fiscal Responsibility and Budget Management (FRBM) Act, fiscal deficit was to come down to 3% and revenue deficit eliminated by 2008-09.

However, slowdown of the economy because of global financial meltdown forced the government to reduce taxes and step up expenditure, overshooting deficit targets.

But now, the Finance Commission has prescribed gradual withdrawal of stimulus.

Due to this and other prescriptions of the Commission, fiscal deficit is now targeted to come down to 5.7% in 2010-11, 4.8% the year after, 4.2% in 2012-13 and 3% the following year.

The fiscal deficit targets are slightly over 5.5% for next fiscal and 4% for 2011-12, set by the government in its papers laid in Parliament.

Similarly, revenue deficit is targeted to be brought down to 3.2% in 2010-11, 2.3% the year after, 1.2% in the following year and eliminated in 2013-14. In 2014-15, the revenue deficit is projected to give way to revenue surplus.

Finance Minister Pranab Mukherjee had said in its interim Budget speech last year, “The 13th Finance Commission has been asked to lay down the roadmap in this regard. The new government will have to address it in the light of future developments in the domestic and international economic environment."

In the speech for full Budget of 2009-10, he said later, “On the medium term fiscal perspective, I await the recommendations of the 13th Finance Commission."