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Thursday, July 02, 2009

India should target zero fiscal deficit

On a cyclically adjusted basis

The Economic Survey for 2008-09 was presented by Finance Minister Pranab Mukherjee in Parliament today, 2 July 2009.

The government should assess the possibility of having a new target of entirely eliminating fiscal deficit, but with a flexibility that it could be widened at a time of economic downturn, suggested the Economic Survey.

The FM's Economic Survey tabled in Parliament today recommended examining the possibility of a new target of zero fiscal deficit on a cyclically adjusted basis.

Since the government may have to provide another stimulus package, which may widen fiscal deficit further, the survey did not state that fiscal deficit targets could be achieved this year.

The Fiscal Responsibility and Budget Management (FRBM) Act mandates the government to reduce fiscal deficit by 0.3% every year to bring it down to 3% of GDP by 2008-09.

However, fiscal deficit touched 6.2% in 2008-09, pressured by three stimulus packages announced by the government. For the current fiscal, it is projected to be 5.5% of GDP in the interim budget.

The Economic Survey, which is tabled by the Finance Minister before the presentation of the Budget, provides the government's assessment of the economy, outlines the problems facing the country and suggests measures for dealing with them.

The Union Budget for 2009-10 will be presented by the Finance Minister Pranab Mukherjee in the Parliament on Monday, 6 July 2009.

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