The Centre’s fiscal deficit narrowed by 33.76 per cent year-on-year to Rs 1.62 lakh crore in April-October, 2010, on the back of better-than-expected revenue from the sale of spectrum and robust tax collections.
In comparison, the Centre’s fiscal deficit stood at Rs 2.45 lakh crore in the corresponding period of the previous financial year.
The government collected Rs 2.71 lakh crore in taxes during the seven-month period, which was 50.9 per cent of the Budget target for the entire fiscal. In comparison, tax collections during the same period last fiscal only amounted to 45.1 per cent of the whole-year target.
Non-tax revenue in April-October, 2010, stood at Rs 1.48 lakh crore, higher than the Budget estimate for the entire fiscal, primarily because of higher realisation from the auction of spectrum, which raked in approximately Rs 70,000 crore more than the government estimated.
However, expenditure also rose by 15 per cent during the period to Rs 6.17 lakh crore from over Rs 5.36 lakh crore in the year-ago period.
At Rs 1.62 lakh crore, the fiscal deficit in April-October, 2010, amounted to 42.6 per cent of the Budget estimate of Rs 3.81 lakh crore for the entire 2010-11, according to data released by the Controller General of Accounts.
This time last year, the fiscal deficit was 61.1 per cent of the Budget estimate for the entire 2009-10 financial year.
Fiscal deficit targets went awry after the government provided a stimulus to the economy in the aftermath of the global financial crisis that broke out in 2008. Among the measures, the government slashed taxes and stepped up public expenditure to spur growth of the economy. However, this also led to widening of the fiscal deficit.
As a result, the fiscal deficit doubled to over 6 per cent in 2008-09, as against the maximum permissible limit of 3 per cent stipulated by the Fiscal Responsibility and Budget Management Act. The deficit rose further to over 6.5 per cent last fiscal.
After the government partially rolled back the stimulus by raising excise duty, the Budget estimates pegged the fiscal deficit at 5.5 per cent of GDP.
However, despite higher realisation from the sale of spectrum for high-speed telephony and broadband services, the government expects the fiscal deficit to be contained at the same level as its Budget estimates or marginally lower.
“I feel that fiscal deficit target that we have set for ourselves of 5.5 per cent, I expect that target to be met and maybe for us to do a little better than that. So we are on track on our fiscal policy,” Chief Economic Advisor Kaushik Basu told reporters.
This is because the government has also stepped expenditure. In the first supplementary demand for grants, it got parliamentary sanction for spending an additional Rs 54,000 crore over the Budget estimate.
It had also sought separate approval for additional expenditure of another Rs 20,000 crore, which would drain out all the extra money garnered from the spectrum auction.
