Union Budget: Fiscal deficit target set at 5.1% of GDP in Budget 2012-13

NEW DELHI: The fiscal deficit target for the Financial Year 13 has been projected at Rs 5.13 lakh crore Finance Minister Pranab Mukherjee in his Union Budget 2012-13 speech. The target is 5.1 per cent of the Gross Domestic Product (GDP).

Rapid fiscal consolidation was effected in 2010-11 with fiscal deficit dropping to 4.8 per cent of gross domestic product (GDP) from 6.5 per cent of GDP in 2009-10. The Budget for 2011-12 estimated a further reduction to 4.6 per cent of GDP to be achieved through a 16 per cent growth in tax revenue, disinvestment receipts of Rs 40,000 crore and moderation in growth in expenditure to 4.9 per cent.

Economic developments in the current fiscal have panned out very differently than was envisaged at the time of budget formulation. With a sharp deceleration in real GDP growth, particularly in the industry sector and continued high levels of prices in key commodities, a slippage is likely in the deficit targets envisaged at the time of Budget Estimates.

However, with states performing better in overall terms, the combined deficit of the centre and states appears to be on firmer footing, which augurs well for strengthening medium-term macroeconomic prospects. The medium-term outlook is firmly on the consolidation path; albeit with a likely longer tail in terms of time horizon.