India's fiscal deficit surged in June to 1.12 trillion rupees ($27.8 billion) after the government bought the central bank's stake in the country's largest lender, official data showed on Tuesday.
But analysts said the transaction was budget neutral and the jump in the deficit -- from 621.35 billion rupees in the April-May period -- was not a cause for concern.
The deficit up to the end of June was 74.5 percent of the full-year target of 1.51 trillion rupees, the government statement said. During the same quarter last year, the deficit was 52.3 percent of the 2006/07 budget target.
In June, the government paid 355.31 billion rupees in cash to the central bank for a 59.73 percent stake in State Bank of India.
"This transaction will be neutralised by realising equal amount of receipts from Reserve Bank of India during the course of this financial year," the statement said.
"After excluding this transaction, the fiscal deficit up to June is 768.73 billion rupees."
"I don't think there is any reason for alarm now on the fiscal deficit front," said D.K. Joshi, principal economist at domestic credit rating agency Crisil.
"The revenue situation is buoyant. The money spent on buying the SBI stake will get neutralised once the book entries are done later in the year."
Total receipts were at 674.96 billion rupees of which taxes contributed 574.70 billion rupees, the statement said.
The government's total expenditure, including that for the SBI stake buy, stood at 1.8 trillion rupees.
Revenue deficit was at 686.46 billion rupees until June-end, which is 96 percent of the full-year target.
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