The fiscal deficit
By Uday Chatterjee | 28 Feb 2001
The government had targeted a fiscal deficit of 5.1 per cent cent of the gross domestic product during the current year, and, according to finance minister Yashwant Sinha, this targeted has been achieved. This is creditable considering that the year has been marked by agricultural stagnation, industrial slowdown and calamities, which should have led to lower revenues and higher expenditures.
Mr Sinha’s efforts have been supported by the buoyancy of revenues and a widening of the tax base.
In his budget proposals for the next year, the finance minister has projected a fiscal deficit target of 4.7 per cent of the GDP. "I would have managed a lower fiscal deficit but that would have come only at the cost of growth, which is not affordable," Mr Sinha stated in his budget speech. The fiscal deficit target of 4.7 per cent of GDP is in line with the Fiscal Responsibility Bill introduced in parliament in December 2000. This bill calls for bringing down the fiscal deficit to 2 per cent of GDP by 2006.
How does Mr Sinha propose to achieve the target of 4.7 per cent? He has reduced taxes in several areas, simplified and rationalised several tax collection procedures and widened the tax base, which should bring more revenues to his kitty. On the expenditure side, he is taking several steps to control government expenditure.
Considering that he has achieved his target in the difficult current year, he has a good chance to reach his target again if there is political will.
