StanChart: India's Fiscal Deficit Will Rise To 5.4%.

KOLKATA: Standard Chartered Bank has revised its fiscal deficit forecast for 2011-12 to 5.4% of GDP from 5.1%. This is against the government's projection of 4.6%.

The bank said fuel-price hikes will reduce the subsidy burden, but reductions in excise and custom duties will more than offset this benefit to the fiscal position.

"Indeed, we believe risks to our forecast are to the upside. Lower revenue collection owing to slower GDP growth, smaller-than-budgeted disinvestment proceeds, and higher expenditure could potentially push the deficit to 5.8% of GDP, hurting market sentiment, unless the government seeks other ways to raise revenues," the bank said in its latest global research.

The government raised diesel, kerosene and cooking gas prices last week. But it reduced customs duties to 0% from 5% for crude oil and to 2.5% from 7.5% for petroleum products. it has cut the excise duty on diesel to Rs 2.1 per litre from Rs 4.60 a litre.

The bank said these revisions will narrow the losses of India's state-owned oil marketing companies by Rs 50,000 crore this fiscal.

"Local fuel prices' continuing misalignment with global prices is still likely to leave the oil marketing companies with huge losses," the report said.

Source : economictimes.indiatimes.com