Journalism of Courage
Finance minister P Chidambaram’s final Budget under the UPA-II on Monday is expected to state that the twin deficits — fiscal deficit and CAD — are well under control. While the current account deficit is estimated to be about $36 billion in FY14, the fiscal deficit is likely to be at 4.68 per cent of the GDP in the current financial year.
Chidambaram will table the Vote-on-Account on February 17 in Parliament that would include projections for growth, tax collections, expenditure and the deficits.
“Curbs on gold imports have helped. The CAD this fiscal will be less than $40 billion at about 1.8 per cent of the GDP,” said a senior government official.
Chidambaram had recently said the CAD would be less than $50 billion this fiscal, as against $88.2 billion or 4.8 per cent of the GDP in FY13.
The CAD was exceptionally high at 4.9 per cent of the GDP in the first quarter of the fiscal but curbs on gold including the higher import duty have helped bring it under control.
In January, India’s trade deficit shrunk to $9.92 billion while gold and silver imports dropped 77 per cent to $1.92 billion.
The official, however, ruled out any tinkering with the import duty on gold at present. “Such high rates can not be retained permanently but will be reviewed later in the year,” he said.
The finance minister had indicated that the 10 per cent duty on gold would be reviewed after March 31.
Meanwhile, lower than estimated GDP growth along with strict expenditure cuts is expected to bring down the fiscal deficit to 4.68 per cent of the GDP.
“The cutting down on expenditure has helped but the fiscal deficit numbers have also got a statistical boost from the GDP estimate of 4.9 per cent in FY14,” the official said.
The finance ministry had pegged the fiscal deficit at 4.8 per cent of the GDP and Chidambaram has stressed it is a “red line” that will not be breached.
The improvement in the deficit numbers are also expected to help restore faith of investors as well as global rating agencies in the country that had threatened to downgrade India’s sovereign ratings.
The finance ministry had also highlighted its better fiscal position to rating agency Fitch, in a meeting earlier this month.
