Finance minister P Chidambaram said on Tuesday the countrys fiscal deficit, which rose to more than half the Budget estimates for the year in just two months, would be contained within the Budget estimate of 2.5% of GDP.
Fiscal deficit for April-May touched Rs 73,201 crore, 54.9% of the estimated fiscal deficit of Rs 1,33,287 crore for the fiscal. At the end of the year, we will do better than the Budget estimates, Mr Chidambaram told reporters when asked about the sharp rise in fiscal deficit in April-May as per the latest figures.
The government allocates the bulk of its expenditure early in each financial year, but tax payments pick up later.
During the first two months, revenue deficit stood at Rs 67,731 crore, against the budget estimates of Rs 55,184 crore for the year. Budget 2008 had estimated that fiscal deficit would come down from 2.8% of GDP in the previous fiscal to 2.5% in the current fiscal.
The farm loan waiver for over four crore farmers and the expected salary raises for government employees too are pressurising the governments coffers. The government is also foregoing revenue by slashing duties on imported fuel and edible oils to tame inflation, now ruling at a 13-year high of nearly 11.5%, denying the finance minister the much-needed revenue.
The government has also tightened its belt to lower spending. Mr Chidambaram said he was confident of robust economic growth, which would raise tax payments further.
The country has recorded splendid growth in the last few years. Our tax-to-GDP ratio has gone up from 9.2% in 2003-04 to 12.8% in 2007-08, and it is expected to be more than 13% this fiscal, he said earlier at the diamond jubilee function of the Institute of Chartered Accountants of India.
The minister also sought suggestions from the accounting regulator for widening the tax base and to ensure better compliance. The minister added that the government was committed to implementing the goods and services tax from April 1, 2010.