“Fiscal deficit for 2013-14 will be contained at 4.6% of GDP, well below the red line that I had drawn last year,” finance minister P. Chidambaram said, presenting the interim budget in Parliament.
The fiscal shortfall, which is the gap between expenditure and revenue, was 4.9% of GDP in the previous fiscal year. After talking over as finance minister in August 2012, Chidambaram had drawn up a financial consolidation road map to lower the fiscal deficit to 4.8% of GDP in 2013-14, 4.2% in 2014-15 and 3.6% in 2015-16.
The fiscal deficit has come down mainly by shrinking expenditure and higher-than-expected realization from the auctioning 2G radio spectrum.
Plan expenditure—the money spent on creating assets through centrally sponsored programmes and schemes—was reduced by 14.37% to Rs.4.7 trillion.
While the government’s tax revenue declined 5.4% than the budget target of Rs.8.4 trillion for 2013-14, non-tax revenue increased 12.2% to Rs.1.9 trillion, thanks to the more-than-expected revenues from the spectrum auctions.
The government also achieved its revenue deficit target of 3.3% in 2013-14, mostly by significantly curbing Plan revenue expenditure, which was reduced by 16.1% to Rs.3.7 trillion.
Chidambaram has budgeted to reduce fiscal deficit to 4.1% of GDP in 2014-15 and revenue deficit is projected at 3%.
GDP growth has improved and will be 4.9% in the year to March, Chidambaram said. Economic growth had slowed to a decade’s low of 4.5% in 2012-13.
India’s current account deficit (CAD) will be contained at $45 billion this financial year, well below the record high level of 2012-13, the finance minister said. “CAD that threatened to exceed last year’s $88 billion will be contained at $45 billion,” he said.
In the first half (April-September) of 2013-14, CAD narrowed to $26.9 billion (3.1% of GDP) from $37.9 billion (4.5% of GDP) in the first half of 2012-13. Both the government and the Reserve Bank of India (RBI) had taken steps to bring down gold imports, one of the major causes for the widening of CAD in 2012-13. The government had increased customs duty on gold thrice in 2013 to 10% and RBI had imposed a series of curbs on inward shipments of the precious metal.
Chidambaram also said India’s exports are likely to touch $326 billion in 2013-14. Exports were about $304.5 billion in 2012-13. The aim was a robust growth in both exports and imports, the finance minister said.
Both the government and RBI have acted in tandem to bring down price rise, even as food inflation at 8.8% remains a worry, Chidambaram said.
“While our efforts have not been in vain, there is still some distance to go,” he said in the interim budget for 2014-15. “Food inflation still remains a worry although it has declined sharply.”
The wholesale price-based inflation has fallen to a eight-month low of 5.05% in January, while retail inflation was at a two-year low of 8.79%. Food inflation in January stood at 8.8%. It was 13.68% in the preceding month.
RBI had increased key interest rate by 25 basis points to 8% on 28 January. One basis point os one-hundredth of a percentage point.