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Fiscal Deficit: The FM did it…

The finance minister has met his fiscal target. The fiscal deficit in the revised estimates has been kept unchanged at 5.1 per cent of GDP, despite an estimated Rs 75 bn shortfall in divestment, Rs 55.69 bn slippages in subsidies and lower customs revenue for FY 2000-01.

…but how?

Defence Capital Expenditure downsized by Rs 31.47 bn in FY 2000-01

Defence Capital Expenditure has been cut by Rs 31.47 bn for FY 2000-01, notwithstanding the prevailing tension in Jammu & Kashmir due to militant activity. The downsizing of resources in defence could prove to be matter of debate.

Central Capital Plan expenditure cut by Rs 27.18 bn

Despite an estimated lower economic growth for FY 2000-01, the Finance Minister has opted for Rs 27.18 bn cut in Plan Expenditure. Cuts in Grants to State and UT Governments and reduction in Non-Plan Capital Outlay have also helped in bringing down the total expenditure. On the other hand, revenue account of both Plan and Non-Plan expenditures has exceeded the budgeted estimates.

Optimism on the revenue front

Optimism has been shown in excise revenues for the remaining two months of the fiscal year. The FM has estimated a shortfall of only Rs 5.71 bn in excise revenues for FY 2000-01. Going by the present trend (12% growth rate in Apr-Jan 01), the shortfall could be around Rs 29 bn.

GDP growth rate kept constant in revised estimates

The GDP growth rate at current prices has been kept unchanged at 12% while calculating the revised fiscal deficit as a percentage of GDP. Real GDP has grown at a lower rate than that originally envisaged (7-8%). Perhaps, inflation has made up the balance.

Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001

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