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Fiscal Deficit of India

In: Business and Management

Submitted By zia1889
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Fiscal Deficit Of The 11th 5 year Plan
The Arab street and the political will to rein in borrowing for consumption may decide the fate of finance minister Pranab Mukherjee’s desire to peg the fiscal deficit in 2011-12 at 4.6% of the gross domestic product (GDP).
The fiscal deficit target of 4.6%, 0.2 percentage points lower than Mukherjee’s target set last year, rests on two crucial assumptions: international prices of oil and fertilizers will remain in line with the current fiscal’s prices and Mukherjee can resist political pressure to enhance spending on consumption during the course of the year.
Add to these two assumptions the forecast of 9% economic growth next fiscal and 18% increase in tax collections, and the government expects to keep borrowings under check and ease the pressure on the Reserve Bank of India to push up interest rates to combat inflation.
The fiscal deficit, which represents the borrowing to cover the excess of expenditure over revenue, has been at the heart of the budget exercise. Mr. Pranab Mukherjee’s speech identified private investment as a key driver of economic growth and indicated the government has tried to curtail its borrowing to give private sector more space to raise money.
The budget documents were far more explicit on the government’s approach to Monday’s budget.
“The net borrowings from the open market in 2011-12 have been estimated after factoring private sector requirements,” the budget’s fiscal policy statement said.
Subsequently, the budget has been constructed on the premise that the subsidy of retail oil products in 2011-12 can be lowered by 38% to Rs23,640 crore.
“We won’t assume a number for the whole year,” finance secretary Sushma Nath said at a post-budget media conference, while answering a question on the average price of crude for fiscal 2012 that had gone into the oil subsidy forecast.
Brent advanced to...

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