The centres fiscal deficit for 2011-12 came at 5.8% of the GDP,a tad lower than the revised estimate of 5.9%,but the country has little to rejoice as its public debt position is worst among major emerging economies.
The actual deficit number,calculated with respect to the latest GDP at current prices,however,remains way above the Budget estimate of 4.6% as higher subsidy bill coupled with a shortfall in tax collections and disinvestment worsened the fiscal situation. According to the controller general of accounts,the deficit stood at R5,09,731 crore last year,lower than the revised estimate of R5,21,980 crore,mainly due to lower plan expenditure. Plan expenditure was limited at R4,13,513 crore compared to RE of R4,26,604 crore while non-plan spending was at R8,84,931 crore compared to the RE of R8,92,116 crore.
The fiscal deficit for the current year is projected to be contained at 5.1% but analysts have already begun doubting if this could indeed be achieved given the economic slowdown.
The revenue deficit was at R3,84,722 in 2011-12 compared to the revised estimate of R3,94,951 crore. Tax receipts were at R6,31,886 crore,falling short of the targeted R6,42,252 crore,after economic slowdown trimmed corporate earnings and cut in fuel taxes shaved off R24,000 crore in excise and customs receipts. Last year,the government failed to meet the disinvestment target of R40,000 crore after the global turmoil rattled share market and dented investor confidence. Stake sales in ONGC and Power Finance helped the government garner R13,894 crore in 2011-12.
Although India boasts of still-robust economic growth of 6.5% in 2011-12,second only to China and much better than advanced nations,its performance on the fiscal front is far from satisfactory when compared to major emerging nations. In April,IMF projected India’s consolidated fiscal deficit at 8.7% of GDP during 2011,which is expected to remain over 8% in 2012 and 2013. Though IMF’s calculations will not tally with India’s consolidated deficit of centre and states,it paints a gloomy picture of the government finances.
The projections also shows that other EMEs are pursuing fiscal consolidation with greater vigour than India.
For instance,China’s deficit was just 1.2% in 2011 and is expected to remain with 1-1.3% in next two years while Brazil will cap it at less than 3% and South Africa vows to cut its deficit drastically to 3.7% by 2013 from 5.7% in 2012. Large deficits have increased market borrowing year after year,which according to IMF’s assessment,keeps India’s government debt to GDP ratio at 68.1% in 2011,67.6% in 2012 and 66.8% in 2013. Only Brazil has debt: GDP in excess of 60% while South Africa has kept it hovers near 40% and China aims to reduce it to less than 20% in two years and Russia has limited it at less than 10%.