Recent government decisions to rationalise fuel prices have given the finance ministry confidence on reining in the fiscal deficit at 5.3 per cent of gross domestic product for 2012-13, against the 5.1 per cent pegged in the Budget.
Independent economists, however, do not agree, and peg it at 5.7 per cent of GDP.
The Vijay Kelkar panel report on fiscal consolidation, which the ministry is expected to put in the public domain this week, could give clarity to the issue.
At a full Planning Commission meeting on Saturday, Finance Minister P Chidambaram had said major subsidies would be 2.4 per cent of GDP, against the 1.9 per cent projected in the Budget.
At 1.9 per cent, it was estimated to decline from Rs 216,297 crore (Rs 2,162.97 billion) in the revised estimates of 2010-11 to Rs 1,90,015 crore (Rs 1,900.15 billion) in the Budget estimates for 2012-13.
However, if subsidies rise to 2.4 per cent of GDP, the number would be Rs 243,837 crore (Rs 2,438.37 billion).
The net effect will be that the fiscal deficit rises to Rs 5.6 lakh crore (Rs 5.6 trillion) against the estimated Rs 5.1 lakh crore (Rs 5.1 trillion), assuming the revenue side of the Budget behaves the way detailed in the document.
At this level, the fiscal deficit turns out to be close to 5.5 per cent of estimated GDP (Rs 101 lakh crore or Rs 101 trillion).
However, the ministry is confident of curtailing this to 5.3 per cent of GDP, as the disinvestment target could be raised, some more could come from dividends by public sector entities, while non-plan expenditure will be curtailed.
Officials said oil subsidies will be more than projected and the additional amount will be provided in the second supplementary budget.
Despite the latest fuel price moves, oil marketing companies are complaining of Rs 1.67 lakh crore (Rs 1.67 trillion) of under-recoveries.
About 40 per cent of it could come from upstream oil companies, which will leave the government with a subsidy burden of Rs 1 lakh crore (Rs 1 trillion).
This will be in addition to the Rs 43,580 crore (Rs 435.8 billion) already listed for the OMCs for this year but used for meeting the under-recoveries of 2011-12.
They said the fertiliser subsidy would be close to the projected amount of Rs 60,974 crore (Rs 609.74 billion) against the Rs 67,198 crore (Rs 671.98 billion) in the revised estimates of 2011-12l.
They also expect the revenue target to be close to the amount in the Budget on the tax front and some additional inflow of funds from non-debt capital receipts, such as disinvestment (where the budget estimate was Rs 30,000 crore (Rs 300 billion).
The ministry has already told all departments to cut non-plan expenditure by 10 per cent. Some savings could come from this, too, officials say.
Besides, public sector units have been asked to invest their surplus cash or give higher dividends to the government.
The budget pegged the latter figure at Rs 50,000 crore (Rs 500 billion), almost the same as the revised estimates of 2011-12.
With all these, officials said, the deficit could be kept at 5.3 per cent of GDP.
Economists don't agree.
One of them said only Rs 15,000 crore (Rs 150 billion) could come from the disinvestment cleared by the cabinet.
The cabinet has cleared nine companies for this, of which the auction process could be started in National Aluminium, NMDC, Minerals and Metals Trading Corporation and Oil India.
In the first four months of 2012-13, the government has already run up a little over half of the estimated fiscal deficit for the entire year.
In the first quarter, it was 8.1 per cent of quarterly GDP. Devendra Bhatt, director with India Ratings (part of the Fitch group), says the deficit will end at 5.7 per cent of GDP, roughly the same as last year.