India meeting deficit target ‘major challenge’ 


Meeting India’s fiscal deficit target will be a “major challenge,” Finance Minister Pranab Mukherjee admitted yesterday, adding that the South Asian economy faced a difficult few months ahead.
Economists have forecast India may miss its goal of reducing its budget gap to 4.6 percent of gross domestic product by one to two percentage points in the current fiscal year to March as growth loses steam and subsidies swell.
“Adhering to the fiscal deficit target of 4.6 percent of GDP [gross domestic product] in 2011-12 is a major challenge,” Mukherjee told a business audience, adding India had “a difficult last quarter ahead of us in this fiscal year.”
The gap between India’s spending and revenues stood at 6.7 percent of GDP in the first half of 2011-12 and has emerged as a central concern of economists who say it could be between six or seven percent for this financial year.
The deficit problem has been worsened by a sharp shrinkage in growth of tax revenues and the cost of government payments to cover the revenue losses of state-owned oil retailers for selling products at state-set cheaper prices.
The fiscal deficit stood at 4.7 percent a year ago.
In another setback, the government has also raised just three percent of its goal of collecting 400 billion rupees (USD 7.9 billion) from sale of holdings in state-owned firms this financial year, according to official figures.