MoF pegs deficit at 4.9% of GDP

the new devolution formula and Rs 7,000 crore on account of VDIS, is because of an extra outgo of Rs 2,500 crore from the central exchequer due to a spurt in small savings. The Centre bears 75 per cent of the liability on small savings mopped up by state governments.

Another Rs 1,000 crore has been earmarked for additional expenditure on the defence and Fifth Pay Commission arrears, taking the shortfall from estimates to Rs 6,000 crore.

The revenueshortfall (from budgeted estimates) is now only Rs 2,500 crore. This deficit is entirely because of the shortfall in accruals on the customs front. Inflows from direct taxes (corporate and income) are on target and a projected gap in excise revenue is being rapidly bridged through a stepped up anti-evasion campaign.

The aforementioned estimates are after taking into account the mid-term fiscal correction undertaken by the United Front government when the Pay Commission award was hiked and a decision was taken to postpone devolution of funds and cut government expenditure. The expenditure cut was subsequently restored by the Finance Minister P Chidambaram after the VDIS bonanza though he still had to live with a huge shortfall arising out of putting off disinvestments in key central sector utilities.

As far as savings in government expenditure is concerned, there will be none on the non-plan side. On the plan side, savings are estimated at around Rs 1000 crore because of the inability of some centralministries to spend allocated funds. The finance ministry is scrutinising every plan expenditure head with a microscope to see if they can save more : "a few hundred crores here and a few there," according to a ministry official.

The Union finance ministry is planning on pegging the fiscal deficit for 1998-99 at between 4 and 4.25 per cent of the GDP in the interim budget that will be placed in Parliament before 31st March.

The `Pre-Budget’ exercise for the interim budget has been completed. Budget discussions with various central ministries are over. The interim budget will provide `secular’ projections on expenditure and revenue for the whole of fiscal 1998-99 and provide an indicative estimate of the fiscal deficit for the year. The interim budget will not carry any taxation proposals. "The idea is to present a rough estimate of the likely financial scenario for the next fiscal. Accordingly, the fiscal deficit will also be a benchmark for the new government to achieve," a ministry official said. "It isimportant to ensure that the deficit is not pegged at too low a figure – something which the government can not achieve," he stressed.