New Delhi: Despite pressure to spend, Union finance minister Arun Jaitley on Wednesday adhered to fiscal consolidation roadmap and set a target to bring down fiscal deficit to 3.2 per cent of the GDP in the fiscal 2017-18. It was widely believed that Mr Jaitley may keep a fiscal deficit target of 3.5 per cent in 2017-18 to spend funds to boost the economy post-demonetisation.
Fiscal deficit in 2017-18 was earlier targeted to be brought down to 3 per cent from 3.5 per cent in the current fiscal. However, Mr Jaitley now targets 3 per cent fiscal deficit in 2018-19. FRBM Review Panel headed by former Revenue Secretary N K Singh in a report last month had provided for ‘Escape Clauses’, for deviations upto 0.5 per cent of GDP, from the stipulated fiscal deficit target.
“Although there is a strong case now to invoke this Escape Clause, I am refraining from doing so. The Report of the Committee will be carefully examined and appropriate decisions taken in due course,” said Mr Jaitley. Finance minister said that he had taken into consideration the need for higher public expenditure in the context of sluggish private sector investment and slow global growth.
“I have kept in mind the recommendation of the Committee that a sustainable debt should be the underlying basis of prudent fiscal management. Considering all these aspects, I have pegged the fiscal deficit for 2017-18 at 3.2% of GDP and remain committed to achieve 3% in the following year,” said the finance minister. He said that with this gradual approach, “I have ensured adherence to fiscal consolidation, without compromising the requirements of public investment.”
“The fiscal deficit target at 3.2% of GDP in FY18 is lower than expected and positive for money markets, this will ensure transmission of low rates and benefits to the banking sector,” said rating agency India Ratings and Research (India Ratings). Revenue deficit will be reduced to 2.1 per cent for 2017-18 from 2.3 per cent in the ongoing fiscal.
