Risks to fiscal slippage high, plan spending cut needed: DBS

As of November-end, the fiscal deficit had touched 99 percent, a record high.

Mumbai: Risks to fiscal slippage "remain high" and the government needs to cut plan spending to check fiscal deficit at 4.1 percent, even as the Centre moves ahead with its revenue augmenting plans such as spectrum sale and Coal India divestment, Singaporean brokerage DBS said Thursday.

As of November-end, the fiscal deficit had touched 99 percent, a record high.

The government's repeated commentary of adhering to the ambitious target on fiscal deficit suggests that more "corrective steps" should be expected in the current quarter, which may include "necessitating reduction in plan spending over the next couple of months," it said.

It can be noted that the government has so far resorted to a 10 percent cut in non-plan spending and has also gained from the reduction in oil subsidy due to diesel price deregulation and crude price correction, while on the receipts front, it has increased excise duties on fuels.

Much to the chagrin of industry, the government has set a high base price for the March 4 spectrum auction and analysts peg it will notch up over Rs 1 lakh crore from the sale. Apart from that, tomorrow's 10 percent stake sale in Coal India is also expected to fetch around Rs 24,000 crore.

DBS said the CIL stake sale alone will help meet half of the divestment target, but pointed that proceeds from the spectrum sale will trickle in tranches and will only help "partly" in bridging the fiscal gap.

The government has already exhausted 98 percent of the budgeted fiscal gap as of November, largely due to a difficulty in garnering revenues.