Despite facing challenges on the fiscal deficit front,the government will not compress plan expenditure – an exercise it undertook in 2012-13,as it is keen to boost growth. Revival of the economy is essential and continued spending by the government will encourage growth. So we are not thinking about containing plan spends, said a senior finance ministry official.
Instead,it is banking on telecom spectrum auction and disinvestment proceeds to get its fiscal math right. It is also hopeful that the additional outlay on the oil subsidy will not be more than Rs 20,000 crore this fiscal.
Economic growth slowed to 4.4 per cent in the first quarter of 2013-14 with the rise in gross fixed capital formation and private final consumption expenditure also subdued. Continued government spending is being seen as one of the ways to boost demand and return to at least 5 per cent growth this fiscal. But this could put further pressure on government plans to keep the fiscal deficit at 4.8 per cent of the GDP in 2013-14,which has already begun to look like a steep target due to challenges posed by lower tax revenues and a higher than expected oil subsidy bill. The Centres fiscal deficit has touched 74.6 per cent of the full year target between April and August.
Finance minister P Chidambaram has,however,stressed that the fiscal deficit is a red line that must not be breached. The finance ministry had already announced a 10 per cent cut in non-plan expenditure as well as a set of austerity measures. Last fiscal,the government had managed to bring down the fiscal deficit to an unexpected 4.9 per cent through compression in spending that resulted in a 17 per cent cut in plan expenditure. For 2013-14,the Budget has pegged the plan expenditure at Rs 5,55,322 crore almost 30 per cent higher than the revised estimate of Rs 4,29,187 crore last fiscal.
We are hoping that the proceeds from the spectrum auction will make up for lower tax revenues. Also,residual stake sales in Hindustan Zinc and Balco will help bridge the deficit, the official said.
The disinvestment department is also understood to be working on plans for stake sales in Indian Oil Corporation,Coal India Ltd and Power Grid Corporation over the next few months.
Bond buyback unlikely this fiscal
The finance ministry has indicated that it may not go ahead with the proposed bond buyback programme this fiscal. It is yet to be decided but no allocation as such has been made in the borrowing plan for the second half of the fiscal, said a senior official,adding that it has to be fiscal deficit neutral.
It cant be done if it will have implications on the fiscal deficit target of 4.8 per cent, he said.