'Fiscal deficit may overstep estimate of 5.5 per cent in FY10'

MUMBAI: The government's gross fiscal deficit (GFD) is likley to over-shoot the budgeted estimate of 5.5 per cent in FY10 on account of an increase in expenditure and slow pace of increase in tax revenue, an economic think-tank has said.

"In the interim budget, the Government had pegged the gross fiscal deficit at Rs 3,32,835 crore. This is estimated at 5.5 per cent of the GDP, lower than the 6.1 per cent ratio in 2008-09," Centre for Monitoring Indian Economy (CMIE) said in a report on the state of Indian economy.

"The ratio is expected to remain higher than the budgeted estimate in 2009-10," it said.

The change in economic environment in 2008-09 and 2009-10 implies an increase in the demand from different segments of the economy for a stimulus package.

"Increase in government expenditure and a slow pace of increase in tax revenue will increase the gross fiscal deficit during the year beyond the budgeted estimate of 5.5 per cent," the report said.

CMIE said that lower tax revenues would be on account of post-budget announcement of cuts in the rates of excise duty and service tax.

The global liqudity crisis affected the domestic economy and the fiscal deficit adversely, it said, adding that India's fiscal policy turned expensionary during the second half of 2008-09.