Government confident of not breaching the deficit target
September, 07th 2011
The government is confident of staying within the budgeted fiscal deficit in the current year despite the accounts showing a grim situation at the end of the first four months of the current year.
"First quarter trends reflect that the government would be able to meet the deficit targets as set in the Budget Estimates," the Finance Ministry said in its quarterly review of government finances tabled in Parliament on Tuesday.
The government has set a fiscal deficit target of 4.6% of GDP in the current year, a marginal improvement over the 4.7% in 2010-11 fiscal, but most private estimates show a big slippage.
"We expect the government to miss its deficit target due to both - lower revenues and higher expenditures. Depending on the timing of the payout to oil companies, the headline deficit number could come in the 5.1% to 5.8% range," said Citi economist Rohini Malkani in a note issued on Tuesday.
The fiscal deficit in the first four months of the fiscal stood at 55% of the target. The fiscal deficit during April-June was 39.4% of the budget estimate for 2011-12 against 10.5% of budget amount in the corresponding quarter last year.
The finance ministry says fiscal deficit for the first quarter this year is not comparable to the previous year because of the unprecedented gains from the 3G auctions. "Better performance during 2010-11 may be seen in the context of one time receipts of about 1.3% of GDP during the first quarter from the auction of 3G and BWA spectrum," the statement said.
It also pointed to the high tax refunds for the revenues falling short of the projections. In a bid to clear pending tax refund the government paid out 74,000 crore in refunds in the first quarter.
The high fiscal deficit during the first quarter of 2011-12 is accounted for by a 54.5% decline in revenue receipts and 7.8% increase in expenditure over the year-ago period.
The revenue receipts although lower than last year, are in line with the five-year moving average at 11.5% of budget estimates, the finance ministry said.