Indian fiscal deficit to worsen to 5.4 pct of GDP: Standard Chartered

09:30, June 29, 2011      

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Indian fiscal deficit will account for 5.4 percent of GDP during this fiscal year ending March 31, 2012 from earlier projection of 5.1 percent on losses of revenue and high subsidies, said Standard Chartered Tuesday in a report.

Indian government is estimated to bear 1.2 trillion rupees of looses by state-owned oil marketing companies in current fiscal year and additional 490 billion rupees of losses cut of customs and excise duties for crude oil and refined oil products each year.

Indian government decided to reduce customs duty for crude oil to zero from 5 percent, with 2.5 percent for petroleum and diesel from 7.5 percent.

The excise tax for diesel also was lowered from 4.6 rupees per liter to 2.1 rupees per liter in a bid to relief the burden of oil marketing companies, which sell oil products at artificially low prices.

The report also expects smaller disinvestments proceeds and higher expenditure could potentially enlarge fiscal deficit to 5.8 percent of GDP, compared with governmental aim of 4.6 percent of GDP.

Indian government may have to seek other ways like sanction of coalmines or assets managed by Specified Undertakings of the Unit Trust of India.

The report predicted Indian inflation will worsen to 9.7 percent in June and 10.3 percent in July from 9.06 in May.

India's central bank Reserve Bank of India is expected to lift key interest rates by 25 basis points in the end of July with another 25 basis points of hike in August.

Indian government traditionally bends market rules and provides fat subsidies for low oil products, fertilizer and food to woo support from economically weak people.

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