Govt may delay fiscal consolidation roadmap in Budget

The target of 3% will be reached in 2018-19

 The government may deviate from the fiscal consolidation roadmap and up its deficit target for 2016-17 from 3.5 per cent as set in the Budget this year.

Economic Affairs Secretary Shaktikant Das in a fresh interview to YouTube channel on Monday said the government will neither be too strict in adhering to the target nor too lenient.

“There are two schools of thoughti as far as fiscal deficit target is concerned. One says, you should not worry much about fiscal deficit and spending is something you should give entire focus on. Another school says, must maintain tight fiscal deficit otherwise the repayment capacity comes under stress,” Das said, adding, “The solution lies in the middle”.

Fiscal deficit is the difference between what the government earns and what it spends. The difference is made up through borrowing from the market.

Das said, borrowing is not bad but the only thing the government has to be careful is about its ability to repay the borrowed money.

Bring growth

He said, expenditure is important because the government has to implement development schemes and see that economic growth arises out of these schemes.

If the government postpones its fiscal consolidation roadmap in the upcoming Budget, this will be delayed by two more years and the target of three per cent will be reached in 2018-19 instead of the pre-set 2017-18.

The Reserve Bank of India, however, has been watching this number very closely, and in fact, is of the opinion that the government should bite the bullet and stick to the roadmap. International rating agencies and brokerages, which also watch the numbers very closely, believe that the government may deviate in order to push rural demand and pay higher wages after implementation of 7th Pay Commission award.

Fiscal prudence

 Economic Affairs Secretary Das said govt will neither be too strict in adhering to the target nor too lenient

 He said borrowing is not bad but the only thing the government has its ability to repay the borrowed money

Expenditure is important because the government has to implement development schemes