With fiscal deficit spiking, price rise imminent: report

With fiscal deficit spiking, price rise imminent: report
The country’s fiscal deficit is set to rise alarmingly over and above the budget estimate of 3.2% of GDP (gross domestic product) for the current financial year (2017-18), according to a bank report.

Fiscal deficit refers to the difference between the government’s total revenues and total expenditure.

According to a report by United Bank of Switzerland (UBS), the world’s third largest asset manager, the deficit is expected to go up by 50 basis points (0.5%) to 3.7%, a rise of 15.63% over the target for the year ending March 2018. This will further cause inflationary pressure on the economy.

“The reason for the decline will be lower revenue collections (excise duty cuts, lower telecom collections, lower RBI dividend transfer) and higher expenditure (front loading of spending and possible stimulus to boost domestic demand),” the UBS said in a report on Friday.

Finance Minister Arun Jaitley had estimated the fiscal deficit for FY18 at Rs 5,46,532 crore.

However, the central government’s fiscal deficit has already reached 96.1% of the full-year target at the end of August.

The Reserve Bank of India (RBI) transferred Rs 30,659 crore, less than half the amount (Rs 65,876 crore) it transferred last year to the government.

The RBI has been under pressure, printing new currency notes after the note-ban and managing the excess liquidity generated by demonetised notes.

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