Better than projected revenues from the spectrum auction for 3G services and Broadband Wireless Access is likely to reduce the Centre's fiscal deficit to 4.47 per cent of the GDP during 2010-11 from an estimated 5.5 per cent and curtail its huge borrowings.
"Fiscal deficit and borrowings should definitely come down, unless the government goes for a spending spree on other things," Crisil Chief Economist D K Joshi said.
Exceeding all hopes, the auction for spectrum ensured an inflow of Rs 106,336 crore (Rs 1063.36 billion) to the government coffers, over three times the original estimate of Rs 35,000 crore (Rs 350 billion) from both the 3G and BWA spectrum auctions.
The auction for BWA spectrum ended today with successful bidders committing over Rs 38,617 crore (Rs 386.17 billion) . Earlier, the 3G spectrum auction had yielded over Rs 67,719 crore (Rs 677.19 billion).
Internet Service Provider Infotel emerged as the only pan-India winner for BWA spectrum by committing Rs 12,872.52 crore (Rs 128.73 billion). Higher inflows will have positive implications for fiscal deficit, which is the difference between total expenditure and total revenue that the government meets through borrowings.
Meanwhile, Joshi cautioned that the government should be careful about its spending.
"I can't say by how much exactly the fiscal deficit will go down, but it will be below the budget figures. If this year borrowing is not tamed, then next year will be a really difficult year, as there will not be a 3G bonanza," Joshi said.
Global investment banker Barclays Capital had projected fiscal deficit to decline to 4.5 per cent in 2010-11 on the basis of the 3G auction results alone. Barclays, however, said it does not foresee any major change in the government's borrowing calendar for the first half of the current fiscal.
"However, the chances of a second half borrowing being lower than currently projected (Rs 1.7 trillion) have risen significantly (after the mega success of the 3G spectrum sale)," it said.
The government has estimated its gross market borrowings this fiscal at Rs 4.57 trillion, most of which will come in the first half of this fiscal.
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