Jan 4, 2000|
Fiscal deficit at 81% of target for FY2000
The government has stated that the fiscal deficit during the period April - November was 80.6% of the targeted level for fiscal year 2000. The government has stated that the fiscal deficit during the period April - November was 80.6% of the targeted level for fiscal year 2000.
The government has set the fiscal deficit at 4% of GDP (new series) for the fiscal year 2000. However, in view of the slow growth in tax collections and the sharp rise in defence and administrative expenditure, the government has overshot the target. Added to this is the delay in the disinvestment process under which the government was expected to garner Rs 100 bn. It is likely that the government will exceed the deficit target for the full year. Infact the government has already initiated measures to increase its annual borrowing limit, which has already been exhausted.
A higher fiscal deficit would create an upward pressure on the interest rates and this could lead to a crowding out of investment. Infact, in recent months, investment has actually failed to pick up in line with expectations (partly underscored by lower imports). Demands for reduction in interest rates have already been voiced in view of this.
The government should actively consider a reduction in revenue expenditure to control the deficit. However, in view of the forthcoming elections to the state assemblies this will be an unacceptable solution. In the meantime, investment will suffer and the fiscal deficit will continue to grow faster than the estimated rate.
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