The government may fail to rein in the fiscal deficit despite the focus on the Fiscal Responsibility and Budget Management Bill, the National Council of Applied Economic Research has said.
The latest issue of Macrotrack, the NCAER's monthly report, says the lack of a clear fiscal strategy combined with the current mismatch between Budget estimates and actual outturns are responsible for the situation.
Among other things, the FRBM Bill aims at eliminating the revenue deficit and achieving an overall fiscal deficit target of 2 per cent of GDP between April 2001 and March 2006.
However, even at the middle of the specified period, the targets look distant. With Lok Sabha elections slated for 2004, the predominant consideration behind Budget 2003-04 would be political prudence rather than fiscal foresight, signaling yet another year of lost opportunity, the report said.
Over the years, not only have the fiscal deficit figures for both the Centre and states worsened, variations in the actual outcomes from the budgeted estimates have increased.
Unrealistic targets in the absence of implementation of policy changes, an inability to adequately restructure the tax system and collection machinery are responsible for the sorry state of affairs.
The trend of basing Budget estimates on expenditure restriction without any subsequent effort to exercise fiscal discipline has also contributed. Additional demands placed during the year have also added to slippages.
"Indeed, it would appear that the absence of a system for medium to long term fiscal policy planning at the finance ministry lies at the corner of the observed 'slippages in fiscal markmanship'", the report goes on to say.
