Amid volatile commodity prices and a sluggish global economy, finance minister Pranab Mukherjee on Wednesday said meeting the 4.6% fiscal deficit target for FY'12 will be a "great challenge".
"With the crude prices remaining where they are, it will be a great challenge to maintain the fiscal deficit numbers at 4.6% this year. However, we will make strenuous attempts to keep the fiscal deficit at around these numbers," he said while addressing the Economic Editors conference here.
Mukherjee said the government would be closely monitoring revenue and expenditure trends and take steps as deemed appropriate.
The government proposes to bring the fiscal deficit down to 4.6% of the Gross Domestic Product (GDP) during 2011-12 from 4.7% in the previous fiscal.
"The fiscal policy stance for 2011-12 remained broadly on the consolidation track, complementing the monetary policy stance," the finance minister said.
Government finances have come under stress due to lower than expected revenue realisation, mainly from disinvestment.
Although half of the fiscal is over, the government has only raised Rs 1,144 crore from a stake sale in Power Finance Corporation (PFC). The government had set an ambitious disinvestment target of Rs 40,000 crore for the current fiscal.
The Income Tax Department has already decided to raise the direct tax collection target for the current fiscal by Rs 53,000 crore to Rs 5.85 lakh crore.
Mukherjee further said, "There could be a potential upside in revenue collection in the current fiscal."
He said the government was able to bring down the fiscal deficit to 4.7% in 2010-11 from the originally planned 5.5% on account of inflows from the 3G auctions, but said a similar situation is not expected this year.
He said one of the largest fiscal corrections was achieved in the 2010-11 fiscal, when the fiscal deficit/GDP ratio declined to 4.7% from a level of 6.4% in 2009-10.
"The compression in fiscal deficit must be seen in the light of huge inflows last year on account of telecom spectrum auctions and which is not going to be repeated this year," Mukherjee said.
In order to meet its expenditure requirements in the second half of the fiscal, the government had last month decided to borrow Rs 52,800 crore more from the market, over-and-above the Rs 4.17 lakh crore budget plan for the fiscal.
According to government estimates, small savings during the first quarter (April-June) of the current fiscal declined by Rs 26,542 crore. They had increased by Rs 13,250 crore in the same period last year.