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Deficit spins out of control

india Updated: Sep 29, 2006 01:29 IST
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Social spending blamed

THE COUNTRY'S fiscal deficit is spinning out of control and some corrective measures are needed. Finance Minister P. Chidamabaram expressed his concerns on the rising rate of government expenditure in a note moved before the Cabinet Committee on Economic Affairs (CCEA). The CCEA is scheduled to discuss it on Friday.

According to sources, Chidambaram said expenditure — planned and non-planned — was mounting and the government might not be able to bring down the fiscal and revenue deficits as planned. Though there has been a spurt in revenue mobilisation, massive spending on social-sector programmes has upset the financial plan.

Chidambaram said the government might not be able to rein in the fiscal deficit — at 3.8 per cent of the GDP — as planned. He had projected Rs 1,48,686 crore as the fiscal deficit for 2006-07 in his budget speech. However, in the first four months, the fiscal deficit crossed Rs 86,404 crore, 58 per cent of the expected total.

The note said the targeted reduction in revenue deficit — from 2.6 per cent of the GDP last year to 2.1 per cent this year — would not be possible without corrective measures. The revenue deficit in the first four months of the financial year is Rs 78,210 crore — 92 per cent of the revenue deficit targeted for 2006-07.

A senior official of the Finance Ministry said the note was moved by the minister following a directive by Prime Minister Manmohan Singh.

"Once the CCEA discusses it, some directions may be given to curb expenditure in the next six months," the official said.

The sources said Chidambaram pointed out that resources would have to be found to meet the demand for Rs 40,00 crore in the next six months.

This is in addition to the additional expenditure of Rs 8,668 crore committed while presenting the first batch of supplementary grants to Parliament. The solution could be threefold: limit subsidies to small and medium farmers, the urban poor and farm labourers; transfer all centrally sponsored schemes to states; and cut down on administrative expenditure and travel expenses.

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