Centre concerned over fiscal deficit
Uncertainty on account of disinvestment receipts and a likely higher subsidy requirement does make it a challenging task to adhere to the overall fiscal deficit target for 2011-12, as per a Mid-Year Analysis tabled in Parliament.
"There can be no denial that meeting the target will not be easy this year," it said, adding, "The government is, however, determined to keep overshooting of the fiscal deficit target of 4.6 per cent as minimal as possible." However, the government said the overall fiscal policy stance for the macro economy remains on the consolidation track, even though there may be a small transgression.
In the Budget, the government had estimated the fiscal deficit at Rs 4,12,817 crore or 4.6 per cent of the GDP. In the first half of 2011-12, the fiscal deficit was Rs 2.8 lakh crore, or 68 per cent of the Budget Estimate (BE). "Higher levels of fiscal deficit as a percentage of BE during the first half of 2011-12 raises some concern when compared with the five-year moving average of 54.6 per cent," the mid-year review said.
However, the increase in the fiscal deficit in the first half may be seen in the context of front-loading of direct tax refunds (about Rs 62,230 crore up to September) and one-time receipt from the auction of 3G and BWA spectrum in 2010-11, it said. Citing global and domestic factors, the government today lowered the GDP growth forecast for the current fiscal to 7.5 per cent from 9 per cent.
The Centre has set a target for raising Rs 40,000 crore through disinvestment this fiscal. But with eight months already over, it has been able to mop up only Rs 1,145 crore. The government also expects its subsidy bill in the current fiscal to go up by a massive Rs 1 lakh crore on account of higher outlays toward fertilisers, food and oil. The Budget estimate for subsidy was Rs 1.34 lakh crore.
The government has envisaged gross revenue tax collections of about Rs 9.32 lakh crore in FY`12, translating into a 17.3 per cent increase over 2010-11 actual collections. Prior to the refund of direct taxes, overall growth in tax collections up to September, 2011, stood at 22.6 per cent.
The review said assuming direct tax refunds during the ongoing financial year would amount to 120 per cent of the amount in 2010-11, overall growth of 14 per cent would be required to meet the collection target during the second half of the fiscal.
"This required growth of 14 per cent, though seemingly achievable when compared to the first half performance, is actually more challenging in view of moderation in the growth of the economy as well as on account of a reduction in duties on petroleum products…," it added.