The government is on course to meet its expenditure target for this fiscal, and thereby contain the fiscal deficit below the 4.8% target, finance minister P Chidambaram would have us believe.
As of end-August, the fiscal deficit had already crossed 74% of the Rs542,499 crore target the government has set for the entire financial year, leading to economists flagging the risk of fiscal slippages.
But the finance minister played down those fears. “The 74.6% number is irrelevant. We deliberately front-loaded our planned expenditure,” he told reporters late Tuesday evening.
The planned expenditure is running around 4-5% ahead of last year, he said.
At the end of the fifth month of this financial year, the planned expenditure was at Rs183,091 crore and the non-planned expenditure at Rs4,79,845 crore.
“Now we are planning a compression in the non-planned expenditure. All this will play out over the year,” he said. “Things will even out over the year and I am confident we will remain below the red line of 4.8%.”
On current account deficit (CAD), he said the number will be well below the targeted $70 billion by the end of March 2014.
CAD was at 4.9% of the country’s gross domestic product at the end of the June quarter, way higher than the 3.6% targeted by the government for the whole fiscal.
Chidambaram said a significant fall in gold imports in the second quarter will help bring down CAD. “The first quarter the total quantity of gold imported was I think 345 tonne. In the second quarter, I have seen up to September 25, it is only about 63-64 tonne. So there is a sharp compression in gold imports. So if you net out gold imports, we’ll find that CAD is a very manageable number,” he said.
The finance minister expects the rupee to move towards 60 per dollar levels as money starts flowing in on the back of recent measures taken by the Reserve Bank of India (RBI) to attract foreign exchange.
“When I spoke to the exporters, I said that even at 60 exports are competitive. Rupee is hovering between 62 and 63 now. It means there is still some speculation in the rupee,” he said.
Chidambaram also insisted that economic growth will pick up in the second half of this financial year and slammed analysts saying, “I don’t set much store by what the analysts say or the broking houses say. They come up with one number in the morning and one number in the evening.”
India’s economic growth is expected to fall below 5% in 2013-14 after printing 5% in the last financial year.
Anything higher than 5% and anything closer to 5.5% should be considered a very satisfactory movement forward, said Chidambaram.
At the end of August, the planned expenditure was at Rs183,091 crore and non-planned expenditure at Rs4,79,845 crore
CAD was at 4.9% of GDP at the end of the June, way higher than the 3.6% targeted for the whole fiscal
GDP growth fell to 5% last fiscal and is expected to print at a similar level in the current one.