New Delhi: The government is determined to keep fiscal deficit within the budgeted level of 3.3 percent of GDP as the country cannot afford to have a twin deficit problem, a top official said.
The official said a depreciating rupee and high crude import bill would definitely put pressure on the country's current account deficit (CAD), and a fiscal slippage at this juncture would lead to a twin deficit.
Ruling out any excise duty cut on petrol and diesel, the official said the dependence on oil as a source of tax revenue has to be brought down and this can only happen when the share of non-oil tax to GDP goes up.
"India will maintain the fiscal deficit target as we are a consumption driven economy and tax revenues are also increasing. We are determined to do that. We will not cut expenditure as it would have adverse impact on growth," the official said.
He said cutting expenditure is the easiest way to trim fiscal deficit. "If we cut Rs 1 lakh crore in expenditure, it would lower fiscal deficit to 2.9 percent. But then growth will be impacted," the official said.
The government has targeted 3.3 percent fiscal deficit for the current financial year ending March 2019.
The government's finances have shown improvement in July with fiscal deficit at 86.5 percent of the Budget Estimate (BE), mainly on account of higher revenue collection, as per official data.
The deficit was at 92.4 percent of BE at July-end of the last financial year.
"Income tax revenues are moving in right direction, GST mop up is also recovering and if we keep expenditure within control, we are confident to maintain the fiscal deficit situation. We don't want twin deficit problem," the official said.
On rupee, which fell to a record low of 72.91 to a dollar in intra-day trade Wednesday, the official said the government is watching the situation and would take appropriate steps as and when required.
The current account deficit (CAD), which is the difference between inflow and outflow of foreign exchange, rose to USD 18 billion or 2.4 percent of GDP in April-June quarter on account widening trade deficit.