Fiscal deficit at 88% of annual target

The government’s fiscal deficit for the first nine months (April-December) of this financial year stood at 88 per cent of the annual target comparable with 100.2 per cent of the target it managed during the same period in the previous financial year.

The April-December fiscal deficit — the difference between government revenue and expenditure — stood at Rs.4.88 lakh crore, which is 88 per cent of the Rs.5.55 lakh crore target for the full year set by Finance Minister Arun Jaitley in the Budget. It amounts to 3.9 per cent of the GDP, a target that many industry leaders want to be pushed back in favour of increased public expenditure. They said it will boost domestic demand.

Several economists argue that it is important to stick to the fiscal deficit target since government accounts already fail to show the correct picture.

“The government has Rs.70,000 crore of unpaid bills to the Food Corporation of India due to the food subsidy, and a similar amount of unpaid bills due to the fertiliser subsidy that haven’t been shown in the Budget. This omission makes the fiscal deficit number look better than it is. It is important that the government sticks to the fiscal deficit target because the real number is likely higher than what is being shown,” Ashok Gulati, Infosys Chair Professor at the Indian Council for Research on International Economic Relations told The Hindu.

The other argument is that the government must simultaneously increase public spending and still keep a tight grip on the fiscal deficit target since it is availing the benefit from falling oil and mineral prices.

“The government must stick to the fiscal deficit target. Government expenditure has to also be increased, but the government has to come up with innovative ways to finance this.

“One way is to revive PPPs, and the Kelkar Committee report laid out a good roadmap for this. Another way is to bring to resolution the large number of tax dispute cases held up in court, which will then release the tax arrears,” said M. Govinda Rao, Professor Emeritus at the National Institute of Public Finance and Policy.

The third option is to make use of the huge saving the government is incurring due to falling oil prices. Mr. Jaitley on Friday told the Press Trust of India that the savings from oil prices will be pumped into infrastructure.