Fiscal deficit will be contained at 4.6% of GDP: Chidambaram

Fiscal deficit will be contained at 4.6% of GDP: Chidambaram

The government on Monday said the fiscal deficit for the current financial year will be contained at 4.6 per cent of GDP.

“Let me begin with the good news. Fiscal deficit for 2013-14 will be contained at 4.6 per cent of GDP, well below the red line that I had drawn last year,” finance minister P Chidambaram said in the interim budget presented in Parliament.

The fiscal deficit, which is the gap between expenditure and revenue, was 4.9% of GDP in the previous financial year.

After talking over as finance minister in August 2012, Chidambaram had drawn up a financial consolidation road map to lower the fiscal deficit to 4.8 per cent of GDP in 2013-14, 4.2 per cent  in 2014-15 and 3.6 per cent in 2015-16.

He said the government's objectives included fiscal consolidation, reviving the growth cycle and enhancing manufacturing.

The minister had on several occasions said he had drawn a red line for the fiscal deficit and it would not be breached.

As per current indications, the fiscal deficit has come down mainly on account of expenditure compression and higher realisation from the 2G spectrum auction. The finance minister also said GDP growth has improved and will be 4.9 per cent for the current fiscal.

Economic growth had slowed to a decade's low of 4.5 per cent in 2012-13.

‘Spending cut of Rs 75K cr not to hit growth’

Chidambaram said that the cut in total expenditure during the current financial year by about Rs 75,000 crore will not have much impact on growth.

“Now (with) an expenditure size of Rs 15.9 lakh crore (for 2013-14), I don't think Rs 75,000 crore (cut) will impact so much on growth as some people feared,” he said.
The estimate of overall expenditure was revised to Rs 15,90,434 crore in the interim budget from earlier projection of Rs 16,65,297 crore, a cut of Rs 74,863 crore.

Central Statistics Office has estimated economic growth for the current financial year at 4.9 per cent from 4.5 per cent in 2012-13.

The government has cut Rs 79,790 crore from the budgeted Plan expenditure of Rs 5,55,322 crore for this financial year against the backdrop of a burgeoning fiscal deficit.

The Interim Budget 2014-15, presented by Chidambaram in Parliament, revised the estimate of Plan expenditure to Rs 4,75,532 crore for 2013-14.

On the other hand, the estimate of non-Plan expenditure was revised to Rs 11,14,902 crore in this financial year from the budgeted Rs 11,09,975 crore, a rise of Rs 4,927 crore.

The finance minister said, “On the Plan side, expenditure has been cut or there has been savings of Rs 80,000 crore. On the non-Plan side, there has been extra expenditure of Rs 5,000 crore.

“So, net expenditure reduction is Rs 75,000 crore. If you look at total expenditure, Rs 15,90,434 crore, Rs 75,000 crore is about 5 per cent.”

Plan expenditure stays

For the next financial year starting April 1, the government has kept the Budget estimate of Plan expenditure unchanged at Rs 5,55,322 crore.

Last year, Chidambaram had cut the Plan expenditure to Rs 4,29,187 crore in the revised estimate from the budgeted Rs 5,21,025 crore for 2012-13.

However, the actual Plan expenditure for 2012-13 was even lower than the revised estimate, at Rs 4,13,625 crore, resulting in a reduction of Rs 1,07,400 crore.

Plan expenditure is government spending on social-sector schemes such as Bharat Nirman, the rural employment guarantee scheme and National Rural Health Mission. It includes the Centre's assistance to plans of various states and Union Territories.

The non-Plan expenditure for 2014-15 is budgeted at Rs 12,07,892 crore, which is 8.82 per cent higher than the Budget estimate of Rs 11,09,975 crore for the current fiscal.

Non-Plan expenditure, or recurring spending on items such as salaries and interest payouts, for the current fiscal is slightly higher at Rs 11,14,902 crore.

“Non-plan expenditure in 2014-15 is estimated at Rs 12,07,892 crore. Of this, the expenditure on subsidies for food, fertiliser and fuel will be Rs 2,46,397 crore. This is slightly more than the revised estimate of Rs 2,45,452 crore in 2013-14,” Chidambaram said.

“For fuel subsidy, I have provided Rs 65,000 crore. Rs 115,000 crore has been allocated for food subsidy keeping in mind our government's commitment to implement the National Food Security Act throughout the country.”

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