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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Fiscal Deficit Could Fall Under 4%
Oct 06, 2014

For the first time in seven years, the fiscal deficit could fall below 4 per cent of GDP, as buoyant tax receipts and disinvestment proceeds, along with lower spending on food and fuel subsidies, improve the balance sheet. However, it’s early days still, but if the current trends on both the expenditure and revenue sides continue, the fiscal deficit could lie between 3.9 per cent and 4 per cent in 2014-15. 

Optimism stems from lower crude oil prices and delay in the rollout of the Food Security Act—which are likely to together help cut the total expenditure bill of Rs. 17.94 lakh crore by about Rs 30,000 crore. 

A spurt in economic activities is already translating into higher than estimated tax collections. And the continued bull run is expected to ensure that disinvestment proceeds meet, if not exceed, the target of Rs 58,425 crore.

The last time fiscal deficit was under 4 per cent of GDP was in 2007-08 (2.7 per cent), after which it soared to 6 per cent in the wake of the global financial crisis. Fiscal deficit in 2013-14 was 4.5 per cent of GDP. A lowered fiscal deficit will be a significant achievement for the Government, which has been trying to convince rating agencies of its commitment to fiscal consolidation. A higher sovereign rating would translate into more investments.

Former finance minister P. Chidambaram had estimated a fiscal deficit of 4.1 per cent in the Interim Budget in February. Finance minister Arun Jaitley retained the target in his Budget in July.

Lower global crude prices could translate into savings of Rs. 10,000 crore this fiscal, but only if this trend persists. Crude was trading at lower prices in international markets, much below the finance ministry’s estimate of $110 per barrel, on the basis of which it has allocated Rs 63,426.95 crore as fuel subsidy for 2014-15. Deregulating the price of diesel could bolster the fiscal further. Again, while the Budget had pegged food subsidy at Rs. 1,15,000 crore for the current fiscal, calculations show the delay in implementing the law could result in savings of about Rs. 20,000 crore.

Half the financial year is over, and some states are not keen to implement the National Food Security Act. There will definitely be savings on this account. The finance ministry is also confident that improved market sentiments will translate into success for its big disinvestments in Coal India, ONGC and Steel Authority of India Ltd.

The ministry is also hopeful of good tax collections on the back of a modest recovery in the economy. For 2014-15, tax receipts are estimated at Rs. 9.77 lakh crore. On the non-tax revenue front, the Reserve Bank of India had transferred a surplus of Rs. 56,000 crore to the government.

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