Centre's deficit to hit 5.1%, says study

Reason is sharp drop in rupee

It said there is a risk to a high current account deficit this year due to a sharp decline in Indian rupee and rise in international crude prices.  “There has been a large increase in Central government’s deficits during the first quarter of the current fiscal (2011-12).. Looking beyond, it would not be easy for the government to contain its deficits within the budget estimates,” NCAER said in its quarterly review of the economy.

The government had set a fiscal deficit target of 4.6 per cent of the GDP for 2011-12 However, it has reached over 70 per cent of the whole year target in the first six months itself, according to official data.

The NCAER review said the swelling deficit is also due to a substantial fall in government’s total receipts in first six months to the fiscal. The total receipts have been just 36.3 per cent of the budget estimate.

Slowing down of industrial activities, particularly manufacturing has become a major hurdle for the government in achieving its revenue targets. Declining corporate profit margins have also impacted corporate tax collections.

On expenditure side, there is a clear indication that the government would spend additional money on subsidies. According to estimates, on oil subsidy alone, it will have shell out over Rs 63,000 crore if crude prices remain $100 per barrel in the second half of the year.

“Fiscal deficit is also expected to be hit hard if there is any shortfall in revenue from government’s disinvestment target,” NCAER said.

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