Govt likely to meet FY15 fiscal deficit target of 4.1%, says Citi

The government is likely to meet its fiscal deficit target of 4.1 per cent of gross domestic product (GDP) for the current 2014-15 financial year, says Citigroup.

The fiscal deficit target of 4.1 per cent of GDP for 2014-15 is likely to be met though the fiscal trends are "weak", the global brokerage firm said.

According to the data released by Controller General (CGA) of Accounts, the country's fiscal deficit overshot the budget estimate of Rs 5.31 lakh crore by December-end.

However, a "compression" in planned expenditure coupled with a pick-up in divestments, would likely help the government meet its 2014-15 fiscal deficit target, Citigroup said.

"We believe the fiscal deficit roadmap of 4.1 per cent, 3.6 per cent and 3 per cent of GDP in FY15-FY17 will likely be adhered to thanks to imminent revenue and expenditure reforms, lower crude and an uptick in growth," Citigroup India economist Rohini Malkani said in a research note.

The fiscal deficit during April-December period was Rs 5.32 lakh crore or 100.2 per cent of the 2014-15 estimate, mainly because of subdued revenue realisation.

The fiscal deficit - the gap between government expenditure and revenue - during the corresponding year-ago period stood at 95.2 per cent of that year's target.

The government is committed to restricting the fiscal deficit at 4.1 per cent of the GDP during the FY15, the lowest in seven years, and has taken several steps towards achieving this level.

The government had put in place a fiscal consolidation roadmap, according to which the fiscal deficit has to be brought down to 3 per cent of the GDP by 2016-17.

"While there is some chatter of additional spending to prop up growth, we expect the government to largely adhere to its roadmap on three key factors - expenditure side reforms in areas of direct benefit transfers; pick-up in growth; improved tax buoyancy and decline in crude prices, which will help lower both fuel/fertiliser subsidies," the report added.

Meanwhile, the Coal India stake sale by government may help the exchequer garner about Rs 22,600 crore and provide some cushion to it. More disinvestment in blue chip PSUs is likely to take place in the two months.

"Looking ahead, the government is likely to continue with its efforts to contain the deficit through higher excise collections/ divestments/telecom auctions and cuts in expenditure," the global financial services provider said in its report.