India's fiscal deficit increases to 6.2 per cent in 2008-09

The Centre's fiscal deficit increased to 6.2 per cent of the country's total economic output in 2008-09, the government's internal auditor said in New Delhi  yesterday.

The fiscal deficit for the year stood at Rs330,114 crore, which is 6.2 per cent of the revised gross domestic product (GDP) for the year, which is at Rs53,32,753 crore.

The fiscal deficit target for 2008-09 was earlier revised upwards to 6 per cent from the earlier estimate of 2.5 per cent due to the ongoing economic slowing down. Consequently the government had announced several relief measures such as tax cuts.

The actual expenditure of the Centre stood at Rs881,469 crore, lower by 2.2 per cent from Rs900,953 crore projected in revised estimates, said the Controller General of Accounts (CGA).

Revenues stood at Rs5,44,651 crore, missing the revised target of Rs5,62,173 crore by 3.1 per cent.

The Centre's tax collection fell to Rs447,726 crore, down 3.9 per cent from its earlier target, as the government cut excise duty by 6 per cent and service tax by 2 per cent, among other sector-specific taxes, in three stimulus packages.

The government's revenue deficit, which is the shortfall of current revenues over current expenditure like salaries, also overshot the revised target by 2.4 per cent.

Rating agency Fitch in February,raised concerns about India's fiscal position. Fitch saw India's consolidated deficit, the combined federal and states' fiscal deficit, at 9.5 per cent for the 2008-09 fiscal year, and 7.7 per cent in fiscal year 2009-10.  (See: Rating agencies likely to downgrade India).

Fitch gave India a local currency rating of ''BBB-minus'', its lowest investment-grade level, with a negative outlook.

Meanwhile, India's fourth quarter GDP rose to 5.8 per cent, compared with a growth of  5.3 per cent in the earlier quarter. Economy grew 6.7 per cent for the full year in 2008-09, sharply slower than the 9 or more in the previous three years. (See: India's GDP growth falls to 5.8 per cent in Q4 FY09).

The Central Statistical Organisation has also revised the GDP estimates for the next financial year (FY10)  to 5.8 percent vs 4.4 per cent earlier,due to continuing economic slowdown in major developed countries.