NEW DELHI: The finance ministry has reiterated that the government will not breach its fiscal deficit target of 4.8% of GDP for the current fiscal and it will be able to finance the current account deficit (CAD) comfortably.
The clarification came on Tuesday, a day after the release of data which showed that the government had run up 75% of budgeted fiscal deficit by August, triggering concerns over possible fiscal slippage. The CAD in the quarter ended June was 4.9% of GDP, much higher than 3.7% in the previous quarter, but that did not cause alarm as it was better than expected.
"We will not go beyond the borrowing envisaged in the budget...The budget target of 4.8% of GDP will not be breached," economic affairs secretary Arvind Mayaram told the media.
The CAD is expected to be less than $70 billion or 3.7% of GDP, Mayaram said, adding that the elevated 4.9% in the first quarter of the current fiscal was mainly due to gold imports which would be restricted below 800 tonne this year.
Mayaram said the government had already completed two-thirds of its borrowing, pegged at Rs 3.44 lakh crore, and added that it would not borrow more than the budgeted Rs 2.35 lakh crore in the second half of the fiscal. The secretary said the higher fiscal deficit was to an extent deliberate as the government had speeded plan spending in the early months to support welfare schemes.
The total plan expenditure at the end of August was 33% of the budget estimate, compared with 28.4% at the same time last year. "Higher spending was deliberately planned in first half for speedier implementation of various welfare programmes of the government," Mayaram said. He also pointed out that revenue collections tend to pick up pace in the second half of the year and to that extent fiscal deficit is usually higher in the first half.
"Gross tax collection up to the month of August, 2013 has shown a growth of 8.7% on a year-on-year basis. However, for the month of August, 2013 there has been marked improvement and the tax collection has grown by 18.3% over the collections for August, 2012. Preliminary figures for September show further improvement," he said, adding that the recent austerity measures announced by the government would also help.
Mayaram said tax revenues should also get a leg-up from the pick-up in growth in the second half, pointing to the signs of improvement in manufacturing, electricity and capital goods sectors in July and acceleration in growth of the eight core industries to 3.7% in August from 3.1% in July.
"It (GDP) will be more than 5%...it cannot be less than 5%," the secretary said, replying to a question over most private forecasts pegging GDP growth rate for 2013-14 at around 4%.
He said the increase in the sown area, acceleration in the pace of plan expenditure and the impact of projects cleared by the Cabinet Committee on Investments should also help accelerate growth, and promised more measures to improve economic activity.
"As we are seeing growth clawing back, I am quite sure that the environment will be conducive for further incentivising of growth and we will see whatever steps have to be taken," Mayaram said.
On the issue of interest rates, he said that was for the central bank to decide. "As far as the interest rate is concerned, it is completely the domain of RBI and the Governor will take a call on that," Mayaram said.