Govt to reduce fiscal deficit by 0.1% of GDP every year

The government on Tuesday notified amendments to the Fiscal Responsibility and Budget Management (FRBM) Rules, which aims at bringing down the fiscal deficit to 3% of GDP in the next three years.

"The Central government shall reduce the fiscal deficit by an amount equivalent to 0.1% or more of the Gross Domestic Product at the end of each financial year, beginning with the financial year 2018-19, so that the fiscal deficit is brought down to not more than 3% of the GDP by March 31, 2021," An official notification said.

The Union Budget for 2018-19 proposed to bring down fiscal deficit to 3.3% in the current fiscal, 3.1% in 2019-20, and 3% of the GDP by 2020-21.

However, the fiscal deficit target for the 2017-18 was revised upwards to 3.5% of GDP from original projection of 3.2% after Goods and Services Tax implementation and deferment of spectrum auction. Also, the revenue deficit was projected higher at 2.6% of GDP from previous target of 1.9%.

Last week, the government reported a fiscal deficit of Rs 7.16 lakh crore or 120% of the revised target for 2017-18. Till February, the government received Rs 12.83 lakh crore in revenues but spent over Rs 19.99 lakh crore.

There will be six fiscal indicators for three-year targets in the medium-term fiscal policy statement, against four indicators at present, the new FRBM notification said.

The primary deficit of the government will be an additional indicator.