Sunday, July 13, 2014

Fiscal deficit of 4.1 per cent hinges on GDP growth rate of 5.9 per cent

New Delhi: Finance secretary Arvind Mayaram admitted that the projected GDP growth rate of 5.6 per cent to 5.9 per cent as stated in the Economic Survey for 2014-15 per cent was ambitious. “We are ambitious,” he said in the interaction with members of Federation of Indian Chambers of Commerce and Industry (Ficci) on Saturday morning.

The projected growth rate will determine whether the NDA government will manage to keep the fiscal deficit for 2014-15 at 4.1 per cent, down from 4.7 per cent for 2013-14 only if the growth target is achieved. The reason that the fiscal deficit looks achievable is due to the tempting figures of tax to GDP ration of 10.1 per cent in 2013-14 when the fiscal deficit stood at 4.7 per cent. The tax-GDP ratio will have to go up to 10.6 per cent and it is possible to achieve this if the GDP growth rate touches 5.9 per cent.

Mayaram also pointed to the budgetary measure of capital infusion of Rs 2.50 lakh crore into public sector banks (PSBs) which would help credit outgo for kickstarting manufacturing and infrastructure projects. He was also looking to the Rs 60,000 crore expected from disinvestment, which is not confined to government offloading shares in public sector units but also government shares in private sector. He said that government were able to mop up Rs 18000 crore from disinvestment in Hindustan Zinc and Balco. He expected recoveries to be much higher in the current year.

He also referred to the new directive of market regulator, Sebi, that PSUs must have 25 per cent of retail shareholders and this is going to bring in further collections. He said that nearly Rs 12000 crore was locked up in unspent small monies in different departments, including 50 funds. He said this amount has been unlocked and put into the Consolidated Fund of India.

He said that so far the oil prices at US$ 110 per barrel with the rupee at 61 per dollar has improved to Brent crude at US$108 and the rupee falling below 60 per dollar and the import bill would be in the comfort zone with foreign exchange reserves buoyant.

But the fair weather outlook may not last if the Iraq crisis worsens or Israeli-Palestinian fighting escalates.

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