Govt to reduce fiscal deficit through economic growth: FM

The government will not resort to contraction in capital expenditure to reduce fiscal deficit which has reached nearly half of the budgetary target in the first two months of the financial year itself.

Finance Minister Arun Jaitley, who is due to present his maiden Budget on Thursday,  said he is in favour of reducing the bulging deficit through economic expansion and tax buoyancy.

Replying during the question hour in the Rajya Sabha, he said fiscal prudence was required to put the country’s economy back on track.

“Fiscal deficit has to be maintained at acceptable levels,” he said, but refused to give target for 2014-15 saying his Budget on Thursday will spell out those numbers.

Fiscal deficit in 2013-14 was 4.5 per cent of the GDP, down from 4.9 per cent in the previous year and 5.8 per cent in 2011-12, he said, adding the fiscal deficit was showing declining trend during past three years.

“The level of fiscal deficit during current financial year (2014-15) up to May is Rs 2,40,837 crore which is 45.6 per cent of the budget estimate of 2014-15,” he said.

Government, he said, has adopted roadmap for fiscal consolidation following amendment to the FRBM Act. The FRBM Act provides for lowering fiscal deficit to 3 per cent of GDP.

He said he personally favoured bringing down fiscal deficit by “expansion of economy and tax buoyancy rather than by contracting expenditure”. He said his government will intensify tax collection drive to augment revenues.