FM may relax fiscal target

The 2005-06 Budget had estimated that the fiscal deficit for the year would be brought down to 4.3 per cent of GDP, 0.2 per cent lower than the revised estimate for 2004-05.

While a decision to this effect is still pending, this option is being considered on account of the shortfalls in non-tax revenues anticipated during the next financial year. The shortfall is estimated at Rs 13,000 crore in 2006-07.

One of the factors that could have affected non-tax revenues is on account of debt rescheduling and debt waiver schemes as recommended by the twelfth finance commission. Added to this, high crude oil prices in the international market have also affected the bottomline of oil PSUs.

On the expenditure side, the government has a huge commitment towards its flagship programmes. However, the finance ministry and the Planning Commission have yet to come to an agreement on the gross budgetary support for the next FY. The gap between what is being sought by the Planning Commission and what is being agreed upon by the finance ministry is in the region of Rs 22,000 crore.

While a final decision of how the revenue and expenditure side will be balanced in the budget, keeping in mind the political commitments of this government, one of the suggestions in that regard is to relax the fiscal deficit target.