Economic survey reveals government is likely to meet fiscal deficit of 5.3 percent

Last Updated: Wed, Feb 27, 2013 15:50 hrs

The economic survey released by the government on Wednesday, a day prior to the announcement of General Budget proposal for the fiscal year 2013-14 reveals that government is likely to meet fiscal deficit of 5.3 percent despite a significant shortfall in revenue.

Montek Singh Ahluwalia, Deputy Chairman, Planning Commission of India, told the reporters here that he is hopeful that the stock market would respond positively to the estimates.

"I think what they are saying is that, whereas the original target was 5.1 percent, they are saying, well it might be 5.3 percent. It is a convention that nobody speculates on the budget except the economic survey is allowed to do that. If they are saying so, my guess would be that it will end up being 5.3 percent," said Ahluwalia.

"Actually, the Finance Minister has even mentioned that number earlier, 5.3 this year, he is going to try and contain it and next year, he is going to contain it 4.8. I believe that the markets would regard that as a fairly reasonable effort at fiscal consolidation," he added.

Finance Minister P. Chidambaram has vowed to bring the deficit down to 4.8 percent in the fiscal year that begins in April.

Chief Economic Advisor Raghuram G. Rajan had previously said that 5.3 percent was a 'tough' deficit target for fiscal 2012-13 (April-March), but the spending cuts in areas such as welfare, defence and road projects have convinced economists that the goal may be reachable, even though weak corporate performance and growth has hit tax receipts.

Prioritising expenditure and further cuts to subsidies on fuel are also key to medium-term fiscal consolidation, the report said.

The Reserve Bank of India lowered interest rates for the first time in nine months in January, but rates remain among the highest of major economies.

India is prone to wide external deficits because it imports nearly 80 percent of its oil needs.

Imports of gold, used by small investors as an inflation hedge, are another driver of the deficit and remain high despite a recent hike to import tariffs for the yellow metal. (ANI)

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