Stimulus shock: India’s deficit up 25%

Initiating the stimulus measures to spur the slowing down economy after global financial crisis deepened,the government cut excise duty by four per cent in December,2008. It again cut excise duty as well as service tax by two per cent in February,2009.

So higher impact of stimulus measures in the form of tax cuts came in 2009-10,which resulted in widening of fiscal deficit.

Similarly,Plan expenditure was stepped up to give a boost to the economy,further widening the gap between expenditure and receipts of the government.

As a result,while tax revenue rose by just 2.61 per cent to Rs 4.59 lakh crore in 2009-10 compared to a year ago period,Plan expenditure increased by 9.71 per cent to Rs 3.02 lakh crore.

Adding non-tax revenue,the government’s total receipts rose to Rs 6.06 lakh crore in 2009-10,while together with non-Plan expenditure,the total expenses increased to much higher level of Rs 10.18 lakh crore.

As such,fiscal deficit widened to Rs 4,12,307 crore.

However,if taken as a proportion of GDP,the government was able to restrict fiscal deficit to 6.61 per cent of the size of economy (Rs 62,31,171 crore) against 6.1 per cent a year ago.

It was much lower than 6.7 per cent,envisaged in the revised estimates,given at the time of presentation of this fiscal year’s Budget.

At the time of the presentation of Budget 2010-11,GDP was estimated at a lower level of Rs 61,64,178 crore,and the fiscal deficit was pegged at a higher 6.7 per cent.

If the GDP figures,released yesterday,are taken into account,the figures at the time of Budget 2010-11 would have shown a fiscal deficit at 6.64 per cent. So,the containment of fiscal deficit is not as high and just 0.03 per cent lower than Rs 4,14,041 crore given in the revised estimate.