The current economic slowdown and the fall in revenue of the state government are likely to hit Gujarat in the coming years. According to the revised estimates of the state government for the year 2008-09, the fiscal deficit has crossed Rs10,360 crore.

This amounts to growth of more than 117 per cent from the fiscal deficit of Rs 4,771 crore as per 2007-08 estimates. Further, as per budgetary estimates for 2009-10, the fiscal deficit is likely to climb to Rs 12,148 crore.

The good thing is that the state government expects that the fiscal deficit will not rise above the level of 3 per cent of the gross state domestic product (GSDP). Experts are also of the opinion that the fiscal health of the state is sound and acceptable in the current situation.

As per advanced estimates for 2008-09,the GSDP is expected to be at Rs3,61,846 crore at current prices. The fiscal deficit, as per revised estimates of 2008-09,stands at 2.86 per cent of the GSDP. The revenue surplus for the year 2008-09 as per revised estimates is Rs268.56 crore. The budgetary estimates for 2009-10 reveal a revenue deficit of Rs3913.18 crore and fiscal deficit of Rs12,148 crore as per budgeted estimates of 2.99 per cent of the GSDP.

"The fiscal health of the state is acceptable keeping in mind the current circumstances," said Nayan Parikh, chairman, Nayan Parikh & Consultants. "The slowdown has dented the revenues of the state government while focus on development work has resulted in an increase in expenditure. But the decision to not raise taxes is a step in the right direction as the fiscal deficit should be ignored in the short term in order to focus on overall growth."

Finance minister Vajubhai Vala, said that despite challenges of the slowdown, the state government has adhered to all the targets of Gujarat Fiscal Responsibility Act 2005 in the years 2006-07, 2007-08 and 2008-09. Even for the year 2009-10, at budgeted estimates, the state government has kept its fiscal deficit within the limit of 3 per cent of the GSDP.