The government's efforts to stimulate the economy will cloud its finances, with fiscal deficit projected to widen to 5.5 per cent of the gross domestic product next fiscal -- a development that would entail greater reliance on market borrowings.
Fiscal deficit, a measure that tells if the government is spending within its means, was to come down to 2.5 per cent of GDP this fiscal, but would now be wide off the target at 6 per cent because of a fall in tax revenues, owing to the global financial meltdown, and measures to stimulate the economy.
The revenue deficit is forecast to increase manifold to 4.4 per cent of the GDP during 2008-09, as against 1 per cent estimated in the budget. For the next year, revenue deficit has been pegged at 4 per cent of the GDP.
The gross tax revenue of the government during 2008-09 is likely to fall short by about Rs 60,000 crore (Rs 600 billion) over the budgeted estimates, as per the Interim Budget for FY'10 presented by acting finance minister Pranab Mukherjee on Monday.
The shortfall, according to Mukherjee, was 'on account of the government's proactive fiscal measures initiated to counter the impact of global slowdown on the Indian economy.'
As a result, the government proposes to borrow Rs 3,086,47 crore (Rs 3,086.47 billion) through market loans in the next fiscal beginning April 1.
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