Budget surprise: Govt on firm fiscal roadmap

FM says Centre is on course to meet fiscal deficit target

In a positive message to rating agencies and investors and even the Reserve Bank of India, the government is firm on its course of meeting the fiscal deficit target of 3.9 per cent of GDP in the current financial year ending March 31, 2016, and 3.5 per cent in the next fiscal year.

But economists raised doubts on meeting next year’s fiscal deficit target as the finance minister said he will not compromise on spending side announcing a 11 per cent increase in the total expenditure in the Budget for 2016-17 at Rs 19.78 lakh crore.

This will consist of Rs 5.50 lakh crore under Plan and Rs 14.28 lakh crore under Non-Plan expenses Jaitley kept a window of compromise on deficit target open by saying it is better to have a deficit range.

“The FRBM Act has been under implementation for more than a decade. Both Central and state governments have made significant gains from the implementation of this Act. There is now a school of thought which believes that instead of fixed numbers as fiscal deficit targets, it may be better to have a fiscal deficit range as the target, which would give necessary policy space to the government to deal with dynamic situations,” Jaitley said.

He said there is also a suggestion that fiscal expansion or contraction should be aligned with credit contraction or expansion in the economy.

Industry cheersTerming the Budget as pragmatic and growth-oriented, Hinduja Group of Companies (India) Chairman Ashok P Hinduja said, “The government’s commitment for retaining the fiscal deficit at 3.5% will have sobering effect on the interest rate in general, and on the yields of government and corporate bonds in particular. This will place our economy in the double-digit growth trajectory.

Emami Group Director Aditya V Agarwal said, “The government has been facing many challenges and keeping the fiscal discipline in control is one of the most significant ones. Keeping the fiscal deficit at 3.5%, and yet meeting the growth and social objectives is a difficult task, which the Union Finance Minister has attempted to solve.”