Bikky Khosla | 02 Oct, 2018
Fiscal deficit for the April-August
period climbed to Rs 5.91 lakh crore, accounting for 94.7% of the full year's
target, according to data released by the Controller General of Accounts last
week. Although this figure is marginally better than 96.1% at the same point
last fiscal, no doubt it is worth raising concern. Finance Minister
Arun Jaitley, however, assured that the Centre would
meet the deficit target of 3.3% of GDP for the year, but economy watchers have flagged
concerns over the current situation.
The question is: what room does the
Centre have for cutting fiscal deficit? When the Budget was presented in
February, our macroeconomic indicators were quite stable,
making it to appear that it would not be much difficult to keep the deficit
under control. But things have changed drastically in the last few months, with
rising crude oil prices and falling value of the Rupee, and this situation does
not augur well for the economy, point out some experts.
The Centre has recently announced that it would
borrow less from the debt market for the second half of FY19, signaling that its
finances are under control, but concerns abound over possible shortfalls in
disinvestment proceeds and GST revenue collection. As of now, the Budget target
of raising Rs 80,000 crore from disinvestment in PSUs seems difficult. Also, the
target of collecting Rs one lakh as revenue from GST every month has not so far
met. So, the road ahead will not be easy for the government.
It is also feared that the government, in its
efforts to reduce fiscal deficit, may sacrifice growth, by cutting capital
spending or current spending. In this situation, meeting the 7-7.5 percent GDP growth
target projected in the last Budget will be a difficult task. However, till
now, the Finance Minister seems to be confident enough of meeting both the capital
expenditure and fiscal deficit targets, and it will be interesting to watch how
he manages the fiscal dilemma in the coming months.
I invite your opinions.