Government contains fiscal deficit at four per cent, beats its own target

The finance ministry announced that it has contained the fiscal deficit at four per cent of GDP for 2014-15 at Rs 5,01,880 crore, which is even lower than the stiff 4.1 per cent target set in the Budget.

Union finance minister Arun Jaitley had inherited the ambitious 4.1-per cent fiscal deficit target in the interim Budget prepared by his predecessor P Chidambaram and had taken the bold decision of going ahead with it despite a slowing economy.

However, Jaitley's success in exceeding the target is also based on the same sleight of hand that Chidambaram had used to meet his fiscal deficit target for 2013-14.

Jaitley had slashed the allocation for plan expenditure by Rs 1,07,066 crore to Rs 4,67,934 crore for 2014-15 from Rs 5,75,000 crore in the revised estimate towards the fag end of the year. In doing so, he only followed the precedent set by his predecessor for 2013-14.

The step was taken as several ministries sit on idle funds for the greater part of the year which cannot be reasonably spent in the last two or three months.

According to a finance ministry statement, "The provisional accounts for the year ended 31st March, 2015, have been complied on the basis of March data and anticipated adjustments received from the different ministries. These are the provisional figures and may undergo certain changes during the final compilation of accounts after audit."

Fiscal deficit is amount by which the government's expenditure falls short of its revenue and the gap has to plugged through market borrowing. Excessive borrowing by the government makes funds scarce for corporate investment and also tends to fuel inflation.

The lower fiscal deficit also reduces the government's expenditure on interest payment and unlocks funds for investment in social welfare programmes as well as infrastructure development.

Keeping the fiscal deficit in check, therefore, strengthens the fundamentals of the economy. Fiscal deeconomyficit had already shot past the Budget estimate of Rs 5.31 lakh crore for the full year in the first nine months of the 2014-15 fiscal.

Figures compiled by the Controller General of Accounts had put the fiscal deficit during April-December period at Rs 5.32 lakh crore mainly because of subdued tax realisation in a slowing economy.

Jaitley has repeatedly said that the government is committed to restricting fiscal deficit at 4.1 per cent of the GDP, which would be the lowest in seven years.

The finance ministry further stated that the revenue deficit has also been confined to 2.8 per cent beating the Budget target of 2.9 per cent for the last fiscal.

Gross tax collection registered a growth of nine per cent in 2014-15 and stood at Rs 12,45,037 crore which is lower than the initial target. The non-tax revenue, which includes the mop-up from disinvestment, stood at Rs 1,96,959 crore. As a result of prudent policies and commitment to fiscal consolidation, the fiscal deficit at the end of 2014-15, stands at Rs 5,01,880 crore, which is 98 per cent of the projected figure in revised estimate for 2014-15, the statement added.

Plan expenditure at the end of 2014-15 stood at Rs 4,35,621 crore while non-plan expenditure during the same year has been Rs 11,91,140 crore (99.8 per cent of revised estimate), the statement said. The ministry further said that the government is firmly committed to the path of fiscal consolidation.