Hit by a slowing economy and less than buoyant revenues, the Government's fiscal deficit is beginning to slip out of control.
The fiscal deficit for the first seven months (April-October) of the current fiscal has already hit 75 per cent of targeted deficit for the entire year, according to data released by the Controller General of Accounts (CGA) on Wednesday.
With this, the Chief Economic Advisor to the Finance Ministry, Dr Kaushik Basu, has not ruled out the possibility of a “small slippage” in the fiscal deficit. The Centre has pegged the fiscal deficit target for 2011-12 at 4.6 per cent of GDP.
The Government is expected to indicate the status of the fiscal deficit in the mid-year economic review to be tabled in Parliament shortly.
Meanwhile, CGA's figures say that the total expenditure crossed the 50 per cent mark, while receipts are still under 50 per cent. One of the reasons for lesser revenue is the complete halt in the disinvestment process after the equity sale of Power Finance Corporation. However, a senior Government official said, “We may see action soon, with one public sector undertaking buying equity of others.”
However, bigger problems on the expenditure front would be seen in the third and fourth quarters, he added. The Government has sought approval for giving Rs 13,778.93 crore as additional subsidy to the fertiliser industry and Rs 30,000 crore for the oil marketing companies. These will be accounted in the non- Plan expenditure for the third quarter, which could raise the deficit further, the official said.
On the other hand, with industrial output slowing down, not much growth is expected in advance tax collections. The next instalment of advance tax payments by corporates is due next month. “Nothing extraordinary is expected,” another Government official said.
Despite this, the Government clarified that the Centre would not recklessly cut its expenditure to meet fiscal deficit targets. “A big balancing act is ahead of us. We are keen on fiscal consolidation and bring fiscal deficit as close as possible to 4.6 per cent,” Dr Basu said.