Millennium Post

Finance ministry gets going on fiscal deficit

Finance ministry gets going on fiscal deficit
Making a strong case for corrective action to bring down fiscal deficit, a finance ministry document said that it is essential to achieve macro-economic stability.

‘The challenge before the government lies in ... [taking] corrective action to come back to the path of fiscal consolidation’, said the statement on ‘Quarterly Review of the Trends and Receipts’ tabled in the Lok Sabha by the minister of state for finance S S Palanimanickam.

According to the statement, fiscal consolidation would be ‘extremely essential from the point of view of macro-economic stability and fiscal sustainability.’

The fiscal deficit during 2011-12 was 5.8 per cent of the gross domestic product (GDP), up from 4.9 per cent a year ago.

The government proposes to bring it down to 5.1 per cent in the current fiscal, but the task seems difficult in view of rising subsidy bill and poor progress on the disinvestment front.

The Review, which was tabled in Parliament in pursuance of the Fiscal Responsibility and Management Act, said the uncertainty in the economic situation worked against and the growth rates slowed during the second half of the fiscal leading to reduction in tax receipts.

On the expenditure side, high oil and commodity prices in international pushed up fuel and fertiliser subsidy bills.

These developments, it added, adversely impacted the fiscal situation.

The Finance Ministry had recently sought help of tax experts including former Finance Secretary Vijay Kelkar to suggest a road map for fiscal consolidation. The committee recently submitted its report to the Ministry.

The review took comfort from buoyancy in direct tax collection in 2011-12.
PTI

PTI

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