How will FM deliver 5.1% fiscal deficit target?

The Finance Minister sees FY13 fiscal deficit at 5.1 percent of the gross domestic product (GDP). While some experts believe the number is a tad bit unrealistic, C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (PMEAC) says, it is possible to contain the fiscal deficit in the next year at 5.1 percent.

“The revenue projects are modest, they are not unrealistic. I think it should be possible to achieve the 5.1% of the GDP as the fiscal deficit,” he said in an interview to CNBC-TV18.

He also told Times Now that the government will take action to reduce subsidies on diesel during the 2012/13 fiscal year that begins on April 1. He however, told the TV channel that he does not know whether the expensive subsidy would be totally lifted.

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[caption id=“attachment_246822” align=“alignleft” width=“380” caption=“Indian Prime Minister’s economic advisory council chairman C Rangarajan”]  [/caption]

The Budget had two broad objectives before it, said Rangarajan.

1. Tax-accelarated economic growth

2. Containing the fiscal deficit to sustain high growth rate.

He added that the Finance Minister has made it very clear that the attempt will be to contain subsidies within 2 percent of the GDP in 2012-13. “Therefore, I believe that is much greater commitment on the part of the government now to ensure what is indicated in the Budget is fulfilled.”

Vallabh Bhanshall, Enam securities too believes that the budget has created a more realistic environment.“Interest rates are not going down in a hurry and we should not expect investment to go up suddenly,” he said.

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Ashok Wadhwa, Ambit Holdings, however thinks the budget is low on delivery but high on F&0. He is disappointed that the government did not introduce the direct tax code or the goods ans services tax, but added that the budget is high on direction and credibility.

Sanjaya Barua, Director IISS also agreed that 5.1 percent is a realistic and credible figure for fiscal consolidation.

Even Adi Godrej, chairman of Godrej Industries, expressed disappointment over the 5. 1 percent fiscal deficit. However, he said announcements in the agriculture, power and infra sectors are encouraging.