Budget 2012: Fiscal deficit at 5.9 per cent of GDP

Lower tax revenues and poor disinvestment receipts have pushed up the government's fiscal deficit for 2011-12 to 5.9 per cent of the GDP, as against the target of 4.6 per cent.

For the 2012-13 fiscal starting April 1, Finance Minister Pranab Mukherjee has pegged the fiscal deficit target of 5.1 per cent.

"The combined effect of lower tax and disinvestment receipts and higher expenditure, mainly on account of subsidies, has pushed the fiscal deficit to 5.9 per cent of GDP in the Revised Estimates for 2011-12," Mukherjee said in the Budget 2012-13 proposals.

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"However, I have made a determined attempt to come back to the path of fiscal consolidation in the Budget for 2012-13 by pegging the fiscal deficit at Rs 5,13,590 crore (Rs 5,135.9 billion) which is 5.1 per cent of GDP," he said.

After taking into account other items of financing, the net market borrowings through dated securities to finance this deficit is Rs 4.79 lakh crore, Mukherjee said.

The total debt stock at the end of 2012-13 would work out at 45.5 per cent of GDP as compared to the Thirteenth Finance Commission target of 50.5 per cent of GDP, he added.

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Due to slower economic growth, direct tax collection fell short by Rs 32,000 crore (Rs 320 billion) of the Budget Estimates.

Besides, the government would be able to garner just about Rs 14,000 crore (Rs 140 billion) from disinvestment as against a target of Rs 40,000 crore (Rs 400 billion) for 2011-12.

At the same time, the Government absorbed duty reduction in petroleum sector with annual revenue loss of Rs 49,000 crore (Rs 490 billion), Mukherjee said, adding that the Government had to incur higher expenditure on petroleum and fertiliser subsidy to insulate the people from the rising prices.

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As the government could not meet the timeline fixed for meeting fiscal and revenue deficit targets as per the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act), he announced introduction in amendments to the Act.

"The outbreak of the crisis (2008) coincided with the year when the mandated targets of 3 per cent fiscal deficit and elimination of revenue deficit were to be achieved," Mukherjee said.

"The Government had to deviate from these targets due to injection of fiscal stimulus at that time. Following my announcement in the last Budget Speech, I am now introducing amendments to the FRBM Act as part of Finance Bill, 2012," he said.