Slower growth stunts India's fiscal deficit efforts

By siliconindia staff writer   |   Friday, 17 September 2004, 07:00 Hrs
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MUMBAI: Government's efforts to rein in the high fiscal deficit are unlikely to succeed, with the Budget gap seen remaining at 4.8 per cent of gross domestic product (GDP) this year as revenues slip on slower growth, according to a Reuters poll.

The poll of 11 economists showed the Government's revenues falling short of its Budget target by a median Rs 117.5 billion ($2.6 billion), as growth in Asia's fourth-largest economy slows to 6.1 per cent in the year ending March 2005 from a robust 8.2 per cent expansion in the previous year.

"We think the Government's seven per cent GDP growth assumption is a little optimistic and there have been cuts in import duties recently," said senior director sovereigns at Fitch Ratings, Brian Coulton.

Economists said the Government's revenue growth assumptions had been far too ambitious and collections were likely to fall short of targets as growth slowed by erratic monsoon rains in the farm-dependent economy resulted in lower tax payouts by companies.

India's new Left-backed Congress-led Government estimated in its first Budget in July that tax revenues would grow at a fast clip of 25 per cent to Rs 2.34 trillion.

With growth pegged at seven per cent, the Government had hoped to curb the deficit to 4.4 per cent of GDP, or Rs 1.37 trillion.

Official data released in August showed the April-July fiscal deficit at 36.7 per cent of the target for the full fiscal year.

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