Budget paves way for lowering twin deficits, says RBI
The Reserve Bank today welcomed the General Budget, saying it has laid the foundation for lowering fiscal and current account deficits, apart from supporting both domestic and foreign investments.
The central bank said the government's net market borrowing target of around Rs 5 lakh crore (budget estimate for the next fiscal is Rs 4.84 lakh crore) is manageable.
RBI Deputy Governor Urjit Patel at the customary post-budget press conference here said, "The Budget will go a long way in lowering the fiscal risks.
"The fiscal targets achieved in 2012-13 (5.2 per cent of GDP) and that laid down for 2013-14 (projected at 4.8 per cent) will lay the foundation for a sustainable rebalancing of government finances. This would impart confidence in the economy and support investments, both domestic and foreign."
Asked about monetary response to the Budget proposals in general and the fiscal consolidation roadmap in particular, Patel said the RBI response will be known on March 19. "As you know, the mid-term monetary policy review is next month. So, we will reflect on that and discuss it next month."
The Budget estimated fiscal deficit for the current financial year at 5.2 per cent, and at 4.8 per cent in FY14.
Patel said along with lowering of twin deficits (FD and CAD), the Budget will boost household savings along with creating a space to augment private investment.
"The Budget sets the stage for lowering the twin deficits, moderating the drafts of government on household financial savings and help create the fiscal space to augment private investment," the RBI Deputy Governor maintained.
On the concerns regarding higher subsidies, Patel, who took over the job last month, said the Budget has taken significant steps to bring down fiscal deficit and challenges arising from subsidies are being met by the Government.
"The Budget has taken significant steps forward for taking the overall fiscal deficit down and the challenge of subsidies is being met....this is a medium-term programme and we have both 2012-13 and 2013-14 numbers, which indicate the Government expenditure and borrowings are being brought down and I think, overall that's a good thing."