Thursday, June 2 2005 17:07 Hrs (IST) - World Time -

New Delhi: After reining in deficits last year, Union Finance Minister P Chidambaram today (June 2, 2005) said fiscal deficit will be less than 4.1 percent of GDP and borrowings will be lower than budgeted in 2005-06.

"Both by design and compulsion this year's borrowings will be less than indicated (in the budget)," he said on the sidelines of a launch of weather insurance product 'Varsha Bima' in New Delhi.

"Fiscal deficit during 2004-05 was better than expected at 4.1 percent of GDP. It was lower than the revised estimate of 4.5 percent or even the budget estimate of 4.3 percent," he said.

"So, it can't be more this year, It has to be equal or less (than 4.1 percent)," he added.

In his budget for 2005-06, Chidambaram had decided to press the "pause button" in meeting the Fiscal Responsibility and Budget Management Act target of cutting fiscal deficit by 0.3 percent in the face of higher outgo to States as per the recommendation of 12th Finance Commission.

So, fiscal deficit was budgeted at 4.3 percent of GDP while revenue deficit was pegged at 2.7 percent for 2005-06.

However, Chidambaram said, "If the deficit has been reduced to 4.1 percent last fiscal, then Government has to do much better this fiscal, he said.

So, overall borrowings will be much less than expected, he added. Centre's gross borrowing is budgeted at Rs 1,39,467 crore in 2005-06, net borrowing is pegged at Rs 1,00,836 crore, which is 42 percent higher than Rs 54,201 crore during the last fiscal.

Last year, fiscal deficit was budgeted at 4.3 percent of GDP in 2004-05 but Government revised it upwards to 4.5 percent fearing a wider fiscal gap due to cut in duties on petroleum, steel, polymers and other products.

However, the Government ended the year with a much lower deficit of Rs 1,27,975 crore or 4.1 percent of GDP mainly by curtailing expenditures and pushing up non-tax revenues.

Revenue deficit was also lower at Rs 79,558 crore (2.5 percent of GDP) than the targeted Rs 85,165 crore (2.7 percent) and that from Rs 98,308 crore of 2003-04.