In the Union Budget presented in February 2013, the Finance Minister had vowed to keep the fiscal deficit at 4.8% of GDP. Even then most of us were skeptical about this target. We were worried that it would be a long and difficult task for this target to be achieved.
And now it seems that we were right with our skepticism. In its recent report, the Finance Ministry has reportedly admitted that there have been fiscal slippages in the first half of the year. The findings of this report (as carried by Business Standard) state that there was an increase in expenditure. And a shortfall in revenue. As per the report, the fiscal deficit has already touched 76% of the budget estimates in the first half of the financial year.
The total expenditure for the six month period ended September 2013, was 48.6% of the budget estimates. This is higher than the 46.5% seen during the same period last year. On the other hand revenues, particularly the tax revenues, were much lower. The disinvestment target is not even close to being met as of now.
Even then there have not been any announcements on whether the government plans to cut down on its expenditure to achieve the fiscal deficit target. Given that the elections are due next year, cutting down any of the populist expenses like subsidies, etc, would not bode well. So how would the Finance Minister achieve his target?
In October 2013, Reuters had reported that the Finance Minister could push about US$ 15 bn worth of subsidy expenses of this year to 2015. This would help him achieve the target this year at least. But what would happen next year and the year after that? Guess thegovernment has not really thought this through for the long run.
If the FM does not postpone the expenditure then what are the other alternatives that he has? One is to expedite the disinvestment program. As reported yesterday, the Finance Ministry is toying with the idea of introducing innovative financial instruments for this. Another alternative that the government has is to raise taxes.
The truth of the matter is that India is in a bad shape thanks to its government. And unfortunately the onus of satisfying the government's ambition would once again fall on the common man. Let us not forget that the high inflation and interest rates have already taken a toll on our pockets. At the same time the slowdown has made income streams volatile. With the way things are, the honest tax payers could be asked to stretch themselves even further. And all for what? So that the government can win popularity votes and come back to power!
Do you think the government would be able to meet its fiscal deficit target this year? Let us know your comments
And now it seems that we were right with our skepticism. In its recent report, the Finance Ministry has reportedly admitted that there have been fiscal slippages in the first half of the year. The findings of this report (as carried by Business Standard) state that there was an increase in expenditure. And a shortfall in revenue. As per the report, the fiscal deficit has already touched 76% of the budget estimates in the first half of the financial year.
The total expenditure for the six month period ended September 2013, was 48.6% of the budget estimates. This is higher than the 46.5% seen during the same period last year. On the other hand revenues, particularly the tax revenues, were much lower. The disinvestment target is not even close to being met as of now.
Even then there have not been any announcements on whether the government plans to cut down on its expenditure to achieve the fiscal deficit target. Given that the elections are due next year, cutting down any of the populist expenses like subsidies, etc, would not bode well. So how would the Finance Minister achieve his target?
In October 2013, Reuters had reported that the Finance Minister could push about US$ 15 bn worth of subsidy expenses of this year to 2015. This would help him achieve the target this year at least. But what would happen next year and the year after that? Guess thegovernment has not really thought this through for the long run.
If the FM does not postpone the expenditure then what are the other alternatives that he has? One is to expedite the disinvestment program. As reported yesterday, the Finance Ministry is toying with the idea of introducing innovative financial instruments for this. Another alternative that the government has is to raise taxes.
The truth of the matter is that India is in a bad shape thanks to its government. And unfortunately the onus of satisfying the government's ambition would once again fall on the common man. Let us not forget that the high inflation and interest rates have already taken a toll on our pockets. At the same time the slowdown has made income streams volatile. With the way things are, the honest tax payers could be asked to stretch themselves even further. And all for what? So that the government can win popularity votes and come back to power!
Do you think the government would be able to meet its fiscal deficit target this year? Let us know your comments
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