Fiscal deficit at 5.1% of GDP for FY 13 disappoints

Business

oi-Sunil

By Sunil Fernandes

Published: Friday, March 16, 2012, 13:43 [IST]

The fiscal deficit target of 5.1% GDP set for FY 13 by the Finance Minister still remains high and is unlikely to go down well with rating agencies and analysts, who were largely expecting it to be estimated around 4.5% range.

Of course, the FY 12 deficit that came in at 5.9% of GDP, too, was higher than what economists were expecting.

Seeing that the Finance Minister could not meet the projected fiscal deficit of 4.6% that he made last year, analysts are warning that the 5.1% consolidation by the Finance Minister for FY 13 may also be ambitious.

The reasons are that he has done nothing with fuel subsidies and fertilizer subsidies and raising taxes through indirect taxes is not going to solve his fiscal deficit worries.

Fertilizer and food subsidies cannot be touched and ditto for agricultural income. In fact, for long economists have been suggesting taxing the rich farmers, but farming income is tax free all across the board.

Therefore, it remains a little skeptical on how the fiscal deficit can be maintained at 5.1%, unless the government taxes remain buoyant.

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