See FY13 fiscal deficit around 5.8-6%: HDFC Bank

According to Prime Minister Manmohan Singh's Economic Advisory Council, India's economy will grow at 6.7% in the current fiscal year and fiscal deficit is likely to be 5.06% of the GDP.

In an interview to CNBC-TV18, Abheek Baruah of HDFC Bank says, he is looking at a sizable overshoot in the fiscal deficit. "We are looking at an overshoot, at this stage, to about 5.8-6% of GDP," he adds. Below is the edited transcript of his interview with CNBC-TV18's Gautam Broker and Ekta Batra. Q: Do you think 6.7% is still optimistic? The FM mentioned a cap on LPG cylinders and also a hike in diesel prices in two phases. Do you think he is alluding to possible measures out of the Parliament or is this still a wishlist? A: I think it’s somewhat naïve to conclude that what was contained in the Advisory Council support may indicate something that will happen in that Parliament. It is typically a wishlist that economists come out with. Whether it will translate into a policy reality is a different issue altogether. I think we need to make this distinction very clear. Clearly, hike in diesel prices is desirable from a macro economic perspective. But we also know that it’s political somewhat infeasible, given the pull and pressure of coalition politics. So, I wouldn’t necessarily draw a connection between the two. Q: What is your target on the fiscal deficit for FY13? Inflation target by the Panel was 6.5-7% by the end of FY13. Where would you stand with regards to that? A: On inflation, I think we would be more in the range of 7-7.5%, perhaps around 7.3%. So, reasonably close to the PMEAC number, but slightly higher. On the fiscal deficit, we are looking at an overshoot, at this stage, to about 5.8-6% of GDP. It will depend on how much comes through from disinvestment in spectrum auctions. But even factoring in reasonable collections on both fronts, we are looking at a sizable overshoot.