global crude oil prices (Indian basket) averaged US$ 110.1/bbl in the first nine months, which was muchhigher than what was assumed at the time of budgetformulation. Together with the fact that headlineinflation has been high even with limited pass throughof fuel prices, these have implications for higher levels of subsidies. While efforts are afoot to rein inexpenditure overruns, it is likely that deficitcalculations may have to factor in additionalexpenditure.3.4The Budget for 2011-12 had estimated amodest decline of
4385 crore in revenue receipts,which was placed at
7,89,892 crore over 2010-11.Given that non-tax revenues were bound to dip after a huge jump in 2010-11, revenue receipts were tobe mainly driven by gross tax revenues which wereestimated to reach
9,32,440 crore. It was alsoenvisaged that growth in expenditure would belimited to 4.9 per cent and accordingly totalexpenditure was placed at
12,57,729 crore. As aproportion of GDP, revenue deficit was to be broughtdown to 3.4 per cent and fiscal deficit to 4.6 per cent in 2011-12 (Table 3.1 and Figure 3.1). Asagainst a long-period average annual growth of 13.7per cent in nominal GDP (between 1991-92 and 2007-08), the growth since 2008-09 has been more volatile,impacting fiscal aggregates when expressed asproportions of nominal GDP. For instance, asubstantial part of the correction in fiscal deficit in2010-11 owes to changes in nominal GDP (Table3.1 A). While in absolute terms the provisional fiscaldeficit was close to the BE, as a proportion of GDPthere was sharp reduction.
3.5The macroeconomic backdrop leading to thepresentation of the Budget for 2011-12 was fairlypromising and the Economic Survey had indicated
Table 3.1(A) : Trends in Deficits due to Change in GDP
2010-11(BE)2010-11(AE) 2010-11(RE) 2010-11(QE)At the time ofAdvanceRevisedQuickBudget 2010-11EstimatesEstimatesEstimates(Estimates)GDP(CMP) (
` ` ` ` `
6934700787794778756277674148Nominal GDP growth (per cent)12.520.320.217.2
2010-11(BE)2010-11(RE)2010-11(P)2010-11(P)Fiscal deficit (
` ` ` ` `
Fiscal deficit as per cent of GDP22.214.171.124
a return to the high growth path with a projection of 9 +/- 0.25 per cent. In terms of quarterly GDP data,growth was still strong even though there was somedeceleration in the second quarter for 2010-11.Inflation was above 9 per cent in January 2011 andmonetary policy was in a tightening mode; coreinflation was moderate and while growth in theindustrial sector as per the index of industrialproduction (IIP) was buoyant in the first two quartersof 2010-11, there was strong deceleration in the IIPin November 2010, which was seen more as a roadbump than any long-run problem; and the savingsand investment data showed promise of reverting totheir pre-crisis trajectories. Against this backdrop,the Budget for 2011-12 indicated sustaining theprocess of fiscal consolidation and announced a
Table 3.1 : Trends in Deficits of CentralGovernment
YearRevenueFiscalPrimaryRevenueDeficitDeficitDeficitDeficit asper centof FiscalDeficit
(As per cent of GDP)
: Union Budget documents and Controller General of Accounts.BE : Budget Estimates.P: Provisional Actuals (Unaudited).
:The ratios to GDP at current market prices (CMP)are based on the Central Statistics Office’s (CSO)National Accounts 2004-05 series.