NEW DELHI: The government's fiscal deficit estimate for 2013-14 faces several risks and there could be a slippage if the economy faces challenges in the next financial year, economists have said.
While finance minister P Chidambaram has won praise for keeping the fiscal deficit target in 2012-13 at 5.2% of GDP, marginally lower than the original estimate of 5.3%, economists said the promise of keeping it at 4.8% of GDP in 2013-14 could be a bit optimistic against the backdrop of challenging economic conditions.
"Basing higher revenue generation on strong GDP growth assumptions, taxing the super rich, and one-off revenues to achieve the 4.8%-of-GDP fiscal deficit target is risky, as macroeconomic conditions could be disappointing," Samiran Chakraborty and Anubhuti Sahay, economists at Standard Chartered, said in a research note.
"There is a high probability of fiscal deficit slippage in 2013-14 unless capital expenditures are reined in. Currently, we maintain 2013-14 fiscal deficit target at 4.8% of GDP in line with the government projection, but watch closely for any adverse developments," the Standard Chartered note said.
Chidambaram has defended his estimates and has said he is confident of a pick-up in growth which would help realize the targets while improving economic prospects will also contribute in reversing the gloom.
He has said that the government is committed to sticking to the fiscal deficit target and said the 2013-14 budget had sent a strong message about fiscal consolidation.
"We must redeem our promise by 2016-17 and bring down the fiscal deficit to 3%, the revenue deficit to 1.5% and the effective revenue deficit to zero," Chidambaram said in his
Budget speech. But economists have expressed doubts about the government's ability to stick to a strict fiscal plan against the backdrop of looming elections.
Indranil Pan, chief economist at Kotak Mahindra Bank, said the 4.8% fiscal deficit target for 2013-14 may be slightly optimistic and estimated it to be at 5.3% of GDP.
He said the government has under-provided for oil subsidies and the revenue targets may be a bit optimistic, being contingent on a large divestment programme of Rs 54,000 crore
. Rohini Malkani, economist at Citigroup India, said the Budget arithmetic may be a tad optimistic. "The FM did keep his word on fiscal targets, with the deficit in 2012-13 coming in at 5.2%, marginally below his 5.3% target.
This was in line with expectations, largely due to expenditure compression and the usual deferment in fuel subsidies. Going forward for 2013-14, the Budget arithmetic is based on nominal GDP growth of 13.4%, total receipts of 23.4% and expenditures up 16.4%, all of which we believe are a tad on the optimistic side," Malkani said in a note.
Source : timesofindia.indiatimes.com