FM gets fiscal math right,avoids populism

“The fiscal deficit for 2012-13 has been contained at 5.2 per cent. I propose to bring it down to 4.8 per cent by 2013-14,” Chidambaram said while presenting the Union Budget 2013-14 in Lok Sabha on Thursday. Further,the revenue deficit has been contained at 3.9 per cent in the current fiscal and would be brought down to 3.3 per cent in 2013-14.

“We must redeem our promise by 2016-17 and bring down the fiscal deficit to 3 per cent,the revenue deficit to 1.5 per cent and the effective revenue deficit to zero,” Chidambaram said.

Welcoming the move,NR Bhanumurthy,an economist at NIPFP,said,“The Budget did not turn out to be populist and fiscal deterioration has stopped. It is a positive signal to markets and investors but the target of 4.8 per cent for next fiscal is challenging.” Measures such as direct transfer of benefits and revival of growth will help cut down spending and shore up revenues,he said.

“As widely expected,India’s Budget targets a deficit of 4.8 per cent of GDP. This is in line with the country’s medium-term fiscal consolidation plan recommended by the 13th Finance Commission. The latest Budget details have no rating impact on our sovereign credit rating on India (BBB-/Negative/A-3),” rating agency Standard and Poor’s said in a statement.

In 2012-13,the fiscal consolidation was based on cuts in government spending ambitious plan expenditure that helped the government save about Rs 60,000 crore and contain total expenditure at 96 per cent of the target,revenue mobilisation will be the key next fiscal.

Hoping to achieve a tax to GDP ratio of 11.9 per cent,the Budget has estimated a 19 per cent rise in revenue receipts to Rs 10,56,331 crore in 2013-14 as compared to a revised estimate of Rs 8,71,828 crore for the fiscal.

However,the gross market borrowings pegged at a record Rs 6,29,009 crore in 2013-14,the net borrowings are expected to rise to Rs 4,84,000 crore. This is a 3.5 per cent rise over the revised estimate of Rs 4,67,384 crore in the current fiscal. A finance ministry official attributed the high gross borrowings to a record redemption of bonds estimated at Rs 1,45,009 crore in 2013-14.

The improved fiscal scenario has also been achieved through a lower subsidy bill by 11 per cent in 2013-14. The Budget hopes to cap the total expenditure on major subsidies,including fuel,food and fertiliser at Rs 2,20,971.50 crore for the 2013-14 fiscal as against Rs 2,47,854 crore in the revised estimates for this fiscal. Interestingly,the revised estimates for this fiscal are higher by 38 per cent compared to the budget estimate of Rs 1,79,554 crore.

While the oil subsidy is pegged at Rs 65,000 crore for next fiscal against the Revised Estimate (RE) of Rs 96,880 crore in 2013-13 fiscal,the food subsidy is estimated to rise to Rs 90,000 crore next fiscal from the RE of Rs 85,000 crore in 2012-13.

The fertiliser subsidy is also pegged slightly lower at Rs 65,971.50 crore in the next fiscal,as against the RE of Rs 65,974 crore in 2012-13 fiscal.