Fiscal deficit may exceed target - I-Sec

NEW DELHI, JULY 4. India's fiscal deficit is likely to be much higher at 5.6 per cent of gross domestic product as against the targeted 4.7 per cent, mainly on account of Rs. 20,500 crore tax shortfall during 2001-02, ICICI Securities (I-Sec) has said.

``A status quo fiscal policy is expected to lead to a fiscal deficit close to Rs. 135,000 crores (5.6 per cent of GDP) implying a slippage of around Rs. 18,600 crores from the target of Rs. 116,314 crores," I-Sec said in its report `Economy Watch' released today.

The fiscal deficit would be higher due to Rs. 20,500 crore shortfall in gross tax collections estimated at Rs. 206,031 crores as compared to the budgeted Rs. 226,649 crores, it said.

The lower tax mop up is on the assumption that the industrial growth would be subdued at about 4 per cent during the current fiscal, the report said. I-Sec estimates that total receipts would be lower at about Rs. 239,500 crores as against the targeted Rs. 258,909 crores while total expenditure would be Rs. 374,473 crores as against the budgeted Rs. 375,223 crores.

I-Sec said an additional spending by the Government would only `deteriorate' government accounts for 2001-02. ``Fiscal deficit could turn out to be Rs. 5,000-8,500 crores more, implying a slippage of Rs. 25,000 crores, if the government decides to spend additional 0.5 per cent of GDP," it said.

``Due to long lags, the spending will primarily affect the expenditure side and the effect on the aggregate demand and taxes for this year would be quite muted," it said.

Even if the government spends an additional Rs. 12,000 crores, the resulting expansion in demand is likely to fetch additional taxes between Rs. 3,500 and Rs. 7,000 crores. ``Tax buoyancy will be higher and fiscal deficit lower than Rs. 25,000 crores if extra public spending gives a boost to business sentiment, thereby boosting planned private investment outlay," I-Sec added.

- PTI

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