The government's fiscal headache is getting worse by the day, with the Centre staring at a Rs 1.5-lakh crore hole in its books, nearly three times the level it had anticipated just three months ago.
Finance ministry officials say direct tax receipts, which have remained sluggish, may prove to be a sore point. Estimates show that the government may miss the direct tax receipts target set for the year, and there could be a shortfall of Rs 30,000 crore on this account.
The subsidy bill is also threatening to upset the government's calculations. Officials say that food, fertilizer and petroleum subsidies are expected to widen sharply from the budget estimates for 2011-12. Some estimates say that the food subsidy bill may widen to nearly significantly from the budget estimate of Rs 60,572 crore.
"The situation is tough this year. Let us see. We are still trying," said a senior finance ministry official, who did not wish to be identified.
The government's track record on disinvestment has also been dismal. It is unlikely to meet its target of raising Rs 40,000 crore from stake sale in state-run companies. So far it has been able to raise Rs 1,145 crore from Power Finance Corporation (PFC) sale. Volatile market conditions have dashed the government's hopes of raising money through this route in the current financial year. The government tried to devise several routes for meeting the disinvestment target but so far has been unsuccessful.
The estimates Rs 13,000 crore from auction of spectrum is unlikely to come through due to the uncertainty in the sector after the 2G scam.
The government is banking on higher dividends from state-run firms to help bridge some of the gap. The savings of around Rs 30,000 crore from plan expenditure is expected to provide some cushion. Officials say the revenue department has been asked to step up their efforts in the run up to the budget. The finance ministry is hoping that advance tax receipts in the quarter ahead may also help to some extent.
Officials and policymakers estimate the fiscal deficit to be between 5.2% and 6%, up from the budget estimate of 4.6% of gross domestic product.
Reserve Bank of India (RBI) has also expressed concern over the state of public finances, and has said it would be difficult for the central bank to lower rates in the absence of a credible fiscal consolidation plan.
"Strong signs of fiscal consolidation, which will shift the balance of aggregate demand from public to private and from consumption to capital formation, are critical to create the space for lowering the policy rate without the imminent risk of resurgent inflation," RBI Governor D Subbarao said in his monetary policy review statement on Tuesday.
"In the absence of credible fiscal consolidation, the Reserve Bank will be constrained from lowering the policy rate in response to decelerating private consumption and investment spending. The forthcoming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way," Subbarao said.
Finance ministry officials say direct tax receipts, which have remained sluggish, may prove to be a sore point. Estimates show that the government may miss the direct tax receipts target set for the year, and there could be a shortfall of Rs 30,000 crore on this account.
The subsidy bill is also threatening to upset the government's calculations. Officials say that food, fertilizer and petroleum subsidies are expected to widen sharply from the budget estimates for 2011-12. Some estimates say that the food subsidy bill may widen to nearly significantly from the budget estimate of Rs 60,572 crore.
"The situation is tough this year. Let us see. We are still trying," said a senior finance ministry official, who did not wish to be identified.
The government's track record on disinvestment has also been dismal. It is unlikely to meet its target of raising Rs 40,000 crore from stake sale in state-run companies. So far it has been able to raise Rs 1,145 crore from Power Finance Corporation (PFC) sale. Volatile market conditions have dashed the government's hopes of raising money through this route in the current financial year. The government tried to devise several routes for meeting the disinvestment target but so far has been unsuccessful.
The estimates Rs 13,000 crore from auction of spectrum is unlikely to come through due to the uncertainty in the sector after the 2G scam.
The government is banking on higher dividends from state-run firms to help bridge some of the gap. The savings of around Rs 30,000 crore from plan expenditure is expected to provide some cushion. Officials say the revenue department has been asked to step up their efforts in the run up to the budget. The finance ministry is hoping that advance tax receipts in the quarter ahead may also help to some extent.
Officials and policymakers estimate the fiscal deficit to be between 5.2% and 6%, up from the budget estimate of 4.6% of gross domestic product.
Reserve Bank of India (RBI) has also expressed concern over the state of public finances, and has said it would be difficult for the central bank to lower rates in the absence of a credible fiscal consolidation plan.
"Strong signs of fiscal consolidation, which will shift the balance of aggregate demand from public to private and from consumption to capital formation, are critical to create the space for lowering the policy rate without the imminent risk of resurgent inflation," RBI Governor D Subbarao said in his monetary policy review statement on Tuesday.
"In the absence of credible fiscal consolidation, the Reserve Bank will be constrained from lowering the policy rate in response to decelerating private consumption and investment spending. The forthcoming Union Budget must exploit the opportunity to begin this process in a credible and sustainable way," Subbarao said.
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