FY12 fiscal deficit likely to widen to 5.6%

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Brace yourselves for some nasty numbers on the fiscal deficit front. The deficit figure for the current financial year may come around the 5.6% mark which is significantly higher than the government's 4.6% target, reports CNBC-TV18's Aakansha Sethi quoting sources.

After the additional market borrowing programme earlier this year, the government had admitted it would not meet the 4.6% fiscal deficit target. However, it had not given any numbers on by how much it would exceed the fiscal deficit target.

It is learnt that the fiscal deficit for this year is likely to be at 5.6% due to Rs 1 lakh crore subsidy burden, the overshooting of oil and fertiliser subsides as well as the unmade divestment target of Rs 40,000 crore. So, the government is looking at a fiscal deficit target of 5.1%.

The Fiscal Responsibility and Budget Management (FRBM) targets were 4.6% for this year, 4.1% for the year after and 3.5% for the year after that. However, since the fiscal deficit will be exceeded for this year it gives the government some leeway to hike the fiscal deficit target for the next year as well at 5.1% instead of the 4.1% that had been proposed by the FRBM Act.

In fact the government will introduce an amendment to the FRBM Act in this budget session itself because next year it's also going to have the food subsidy bill in addition to the oil subsidy bill. Unless it takes some strict measures on this it is going to be very difficult to meet that fiscal deficit target. They are looking at a 7.5% to 8% growth target for the next year. The final numbers will be given in the economic survey and the budget, but this is what we are picking up from our sources at this point in time.