Opinion Backtracking from the fiscal cliff
A harsh road of fiscal reform. One assumes the secretary,department of economic affairs,has already committed himself to that road.
There is only one road to travel from Vijay Kelkars projection of a scary fiscal deficit of 6.1 per cent of GDP to Arvind Mayarams sanguine 5.2 per cent in 2012-13. A harsh road of fiscal reform. One assumes the secretary,department of economic affairs,has already committed himself to that road. Otherwise the options are to redo the math or stick to your guns,hoping that some solution will be worked out to help achieve them.
On Thursday the finance ministry,it would seem,chose to go for the second option. It has decided to stick to its borrowing target for the fiscal at Rs 5,69,616 crore and firmly announced the fiscal deficit would largely be on target.
The Kelkar report,submitted to the same ministry shows why analysts are finding it hard to believe. The fiscal deficit crossed the half way mark in the first five months of the financial year to touch Rs 3,37,538crore. Given that this is about a 15 per cent increase over the estimates,the deficit could touch about 5.8 per cent by March,2013,they reason. Markets have already bet on additional borrowings later this year and bond yields on Friday touched a two month low in intra-day trading.
While receipts from the subsidy reforms,disinvestment and spectrum auction could prove to be the game changers,the ministry has little choice but to insist on further rounds of even more petro price rise and cut back on even plan spends. Measures like service tax on railways and steps to improve tax collection are correct steps but Kelkar is even suggesting tweaking direct tax rules to impose interest on less payment of corporate tax.
The writer is Special Correspondent based in New Delhi.
surabhi.prasad@expressindia.com
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