Fiscal deficit up 83% yoy as fertiliser subsidies shoot up

The fiscal deficit has shot up by 83% yoy or up to 132% of the budgeted estimates
for year till November 2008. The sharp increase in the fiscal deficit is likely driven by

(1) Rs310bn additional outlay on fertiliser subsidies;
(2) slow down in tax revenues as dipped by 15.5% yoy for November 2008 and
(3) likely faster spending by the ministries/departments with a view on probable general election in April 2008.


The tax revenues have declined by 15.5% yoy for the month driven by a sharp dip of
29.9% in the corporate tax revenues. While the budgeted estimates expect the fiscal
deficit at 2.5% of GDP, revenue deficit at 1.0% of GDP and primary surplus at.1.1%
of the GDP, under current scenario the revised estimates are likely to be deficit of
3.3%, 2.5% and 1.1% respectively. However, with inclusion of additional Rs310bn of
fertiliser subsidies in the budget provisions and sharp fall in crude prices the off
budget deficit is likely to be contained to 3.9% of the GDP.