Millennium Post

Jaitley keeps fiscal deficit target at 4.1% of GDP, outlines roadmap

Outlining the roadmap for fiscal consolidation, Finance Minister Arun Jaitley on Thursday said the government will retain the fiscal deficit target for 2014-15 at 4.1 per cent of GDP and reduce it further to 3 per cent by 2016-17. Presenting his maiden Budget, the minister said the prevailing economic situation presents a great challenge and there was a need to introduce fiscal prudence that will lead to fiscal consolidation and discipline.

‘My predecessor (P Chidambaram) had set up a very difficult task of reducing the fiscal deficit to 4.1 per cent of GDP in current year... the target is, indeed, daunting.’ ‘Difficult as it may appear, I have decide to accept this target as a challenge,’ he said. Outlining the roadmap for fiscal consolidation, Jaitley said fiscal deficit would be brought down to 3.6 per cent in 2015-16 and 3 per cent by 2016-17. The fiscal deficit which had touched a high of 5.7 per cent in 2011-12, was brought down to 4.8 per cent in 2012-13 and further to 4.5 per cent in 2013-14.

The reduction in fiscal deficit by the UPA government, he said, was mainly achieved by a reduction in expenditure rather than by way of realisation of higher revenues. Jaitley said there are challenges to lowering the fiscal deficit as the country had two years of low GDP growth, a almost static industrial growth, a moderate increase in indirect taxes, a large subsidy burden and not so encouraging tax buoyancy. ‘The task before me is very challenging because we need to revive growth, particularly in manufacturing sector and infrastructure,’ he said, adding choice has to be made whether or not to be victims of mere populism and wasteful expenditure.

Talking about the external sector, Jaitley said there was a ‘turnaround’ in the current account deficit (CAD) situation in 2013-14. The CAD, which is the difference between inflows and outflows of foreign exchange, was brought down to 1.7 per cent of GDP in 2013-14, from a record 4.7 per cent in the previous year.

For every ` in govt kitty, 24 paise will come from borrowing!
For every rupee in government kitty, as much as one-fourth will come from market borrowing in 2014-15 while 20 paise would be spent towards interest payment. The government’s dependence on debt has come down from 27 paise in the previous Budget to 24 paise in the coming year, reflecting ease of pressure on revenue collections. As per the proposals presented by Finance Minister Arun Jaitley in Parliament on Thursday, the gross borrowings of the government in 2014-15 are pegged at Rs 6 lakh crore against Rs 5.63 lakh crore for the last fiscal. On the expenditure side, central plan allocation has been reduced sharply from 21 paise to 11 paise in 2014-15. However, the interest payment would go up to 20 paise compared to 18 paise in the 2013-14.

Plan expenditure raised by 26.9% to `5.75 trillion
The government on Thursday proposed an increase in the Plan expenditure or spending on social sector schemes to Rs 5,75,000 crore for the current fiscal, a 26.9 per cent higher over the actual spent in the previous fiscal. The Plan expenditure is the government spending on social sector schemes such as Bharat Nirman, rural employment guarantee scheme and National Rural Health Mission. Besides, it includes Centre’s assistance to various states and Union Territories Plans. ‘In 2013-14, plan funds to the tune of Rs 4,53,085 crore could be utilised. Plan allocation of Rs 5,75,000 crore in the main Budget 2014-15 marks an increase of 26.9 per cent over actual (spending) for 2013-14,’ Jaitley said.
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