Moneycontrol
Feb 17, 2016 11:52 AM IST | Source: PTI

Government to meet fiscal deficit targets: Citigroup

Reflecting improvement in government finances, fiscal deficit - the gap between expenditure and revenue - in the nine months of 2015-16 worked out to 88 percent of the annual target as against 100.2 percent in the same period last fiscal, according to official figures.


The government is likely to meet its fiscal deficit target of 3.9 percent of the GDP for the current financial year, largely on account of the latest round of excise duty hikes on oil products and marginal compression in expenditure, says a Citigroup report.


The government's fiscal deficit roadmap of 3.9 percent of GDP in 2015-16 and 3.5 percent of GDP in 2016-17 looks "difficult" but "achievable", it said.


"In our base case, we now think that the government will be able to meet its 3.9 percent of GDP fiscal deficit target for FY16 because of the latest round of excise duty hikes on oil products in January/February and some marginal expenditure compression," Citigroup said in a research note.


Reflecting improvement in government finances, fiscal deficit - the gap between expenditure and revenue - in the nine months of 2015-16 worked out to 88 percent of the annual target as against 100.2 percent in the same period last fiscal, according to official figures.


The improvement is mainly on account of buoyancy in tax collections, which have kept revenue deficit in check.


"Our revised estimates suggest that the 3.5 percent target is achievable on account of higher revenues from a rise in petroleum excise duty, hike in service taxes, possible SUUTI stake sale, etc. Some fiscal compression could also come from the restrained pace of expenditure compared to the growth in revenues," the report added.


On the Reserve Bank's policy stance, the report said that there is increased likelihood of the residual 25 bps rate cut by the Reserve Bank either in March or April.

RBI Governor Raghuram Rajan on February 2 left the key interest rate unchanged citing inflation risks and growth concerns, while pegging further easing of monetary policy on government's Budget proposals.

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