The government today said it is working to meet the fiscal deficit target of 3.8 per cent of the GDP in the current financial year and also keep borrowing within prescribed limits.
Speaking to reporters outside Parliament, Finance Minister P Chidambaram said the fiscal deficit was higher than expected due to front-loading of expenditure.
Plan expenditure looks high because it is front-loaded. The situation was the same last year as well, he said.
Chidambaram said expenditure has increased because transfer to states have been generous and expenditure on roads, ports and other infrastructure has risen.
He said higher expenditure is good so long as it remains within the budgeted target. As per the fiscal responsibility and budgetary management targets, the government has projected to bring down fiscal deficit to 3.8 per cent of the GDP this financial year, down from 4.1 per cent the previous year.
In a report, JPMorgan Chase Bank said spending could have been front-loaded or some delayed expenditure from last year had come through in the early months of this financial year.
However, it is unclear how much of the jump in expenditure owes to higher populist spending, especially on the National Rural Employment Guarantee Act. The lack of clarity on the reasons and sources of the unexpected surge in spending only increases the uncertainty over achieving the full-year fiscal deficit target, it said.
As per the latest data, fiscal deficit at Rs 77,740 crore in the first quarter accounted for 52.30 per cent of the projected figure of Rs 1,48,686 crore for the entire financial year.
Total expenditure at Rs 1,31,470 crore during the quarter was 23.3 per cent of the total estimates of Rs 5,63,991 crore, while receipts at Rs 53,730 crore accounted for just 12.9 per cent of the projections for the year.