The Economic Survey tabled in Parliament by Finance Minister Pranab Mukherjee on Thursday stressed the need for concerted steps to cut spending and check slippage in government finances so as to achieve fiscal consolidation.
Noting that although the fiscal deficit is likely to come down to 4.1 per cent in 2012-13, the Survey said: “Going forward there is a need to anchor fiscal consolidation on structural reforms in expenditure”.
The hint is towards focussed spending on key social sectors and infrastructure development and pruning leakages in subsidies by identifying targeted beneficiaries through direct transfer as proposed.
With lower-than-expected growth in revenue receipts coupled with slowdown in industry, rising costs and additional spending on account of stickiness in high global commodity prices, the Survey said that there had been slippages in government finances.
“Besides, the financial market conditions were not appropriate for going ahead with the scheduled disinvestment plan. As such, a slippage on the targets of the deficit indicators is likely though efforts are afoot to minimise them,” it said. Explaining the reasons for such a situation, the Survey pointed essentially to an exceptional year when a whole host of factors have turned out differently than envisaged at the time of presentation of the Budget for the current fiscal. It pointed out that while fiscal consolidation is taking place across nations since 2010, India's fiscal deficit has been among the highest in 2010 and 2011.
“In India's case ... a larger correction is needed in terms of key fiscal indicators,” it said even while projecting that the fiscal deficit in 2013-14 would narrow down to 3.5 per cent of the GDP.
“The fiscal outcome in 2011-12 is likely to be affected by the macroeconomic setting which indicates sharp slowdown in industry and rising costs affecting profits,” it said. The government had fixed a fiscal deficit target of 4.6 per cent of the GDP for the current fiscal, but has already overshot the estimates in January. It is widely expected to be pegged at around 5.5 per cent for 2011-12.
As per the survey, the provisional estimates of Centre's resources indicate that the fiscal deficit will be 4.1 per cent in 2012-13, 3.5 per cent (2013-14) and 3 per cent (2014-15, 2015-16 and 2016-17).
