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Fiscal deficit to rise up to 5% of GDP

Source: PTI
December 23, 2008 16:37 IST
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India will miss its fiscal deficit target by a wide margin and the deficit will increase to at least five per cent of GDP this fiscal due to the stimulus package announced to spur demand in the economy, chief economic adviser Arvind Virmani said on Tuesday.

"We already have a very substantial stimulus package this year...two per cent is the fiscal deficit expansion," chief economic adviser Arvind Virmani told reporters after the mid-year review of the economy was tabled in Parliament.

Asked if fiscal deficit will be five per cent of GDP this fiscal, he said: "At least".

The government had, in the budget, targeted fiscal deficit to come down to 2.5 per cent of GDP this fiscal, although it was 3 per cent under the Fiscal Responsibility and Budget Management Act.

Fiscal deficit has already touched 87.8 per cent of the target for the entire fiscal till October.

The government recently gave a nod to an additional expenditure of Rs 42,480 crores (Rs 424.8 billion) during the current financial year.

The amount includes the Rs 20,000 crore (Rs 200 billion) given as a fiscal stimulus package to spur industry.

The government also gave a 4 per cent excise duty cut accross the board.

The government has already sought an additional Rs 1,47,000 crore (Rs 1,470 billion) from Parliament, as the first and second batch of supplementary demands for grants, raising public spending to Rs 9,00,000 crore (Rs 9,000 billion) from Rs 7,50,000 crore (Rs 7,500 billion) originally envisaged in the Budget for 2008-09.

On inflation, Virmani said it is fully under control and will come to an acceptable level of five per cent by this fiscal end. Inflation eased to 6.84 per cent as of December 6.

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