Jaitley raises fiscal deficit target to 3.2%

Finance Minister Arun Jaitley raised the fiscal deficit target for 2017-18 to 3.2% of the gross domestic product but promised to keep it at 3% in the following year.

He also said that the report of the FRBM Review Panel, headed by former revenue secretary N K Sinha, will be carefully examined and appropriate decisions will be taken in due course.

The Committee had recommended debt-to-GDP ratio of 60% by 2023 and fiscal deficit at 3% for next three years.

Jaitley said the Committee has also provided for ‘Escape Clauses’, for deviations up to 0.5% of GDP, from the stipulated fiscal deficit target.

“Among the triggers for taking recourse to these Escape Clauses, the committee has included ‘far-reaching structural reforms in the economy with unanticipated fiscal implications’ as one of the factors,” he said.

 “Although there is a strong case now to invoke this Escape Clause, I am refraining from doing so. Nevertheless, I take note of the fiscal deficit roadmap of 3% recommended by the Committee for the next three years,” he said.

 Jaitley said that considering all these aspects, he has pegged the fiscal deficit for 2017-18 at 3.2% of GDP and remain committed to achieve 3% in the following year.

“With this gradual approach, I have ensured adherence to fiscal consolidation, without compromising the requirements of public investment,” he said.