Millennium Post

No compromise on fiscal consolidation: PC

'The agenda (is) obvious. At the top of the list is fiscal consolidation. There can be no compromise — and I speak for the government — there will be no compromise on the decision to walk on the path of fiscal prudence and contain the fiscal deficit step by step, year by year, until we reach the goal of 3 per cent of GDP in 2016-17,' he said at Delhi Economic Conclave.

Rating agency Fitch on Tuesday expressed apprehension that the poor performance of the Congress in the recent assembly elections could push up the Centre's fiscal deficit as there may be an 'increased likelihood of political pressure to limit expenditure cut-backs.'

The setback faced by the Congress in the state elections, it added, 'could potentially raise political pressure on the government's near-term fiscal goals.'

The Congress was defeated in the elections held in Madhya Pradesh, Chhattisgarh, Rajasthan and Delhi.

The government has set a fiscal deficit target of 4.8 per cent of GDP for the current financial year.
Chidambaram has asserted several times that the red line of 4.8 per cent of GDP for the fiscal deficit will not be breached.

Addressing the Conclave, the Finance Minister said India would also need to focus on the revenue deficit to ensure that borrowings were not used for consumption.

Observing that India cannot afford a high current account deficit, which touched a record $88 billion in 2012-13, Chidambaram said the country should avoid importing gold and raw material that are available at home.

'Nor should India import coal when it has coal in abundance, nor should India tie itself in policy knots and be forced to import commodities which they have the capacity to produce and manufacture,' the minister said.

Chidambaram attributed high inflation to inaction by state governments, saying the onus of taking action against hoarding and profiteering by traders rests with them.

'There is also a need to deal wisely with harvesting and marketing and deal strictly with hoarding and profiteering.

Laws in this behalf — the Agriculture Produce Market Committee Act and the Essential Commodities Act — are entirely in the domain of state governments.

'The powers of notification and enforcement under these acts are with the state governments. Yet, state governments are loathe to take actions on these acts. I think it is necessary to highlight the inaction of state governments in this regard, while accepting the central government must do all it can within its powers to moderate inflation.'

Talking about the new game changers of the economy, Chidambaram said they would include the Direct Taxes Code, the Goods and Services Tax (GST), a higher level of foreign direct investment in insurance and the Indian Financial Code, a proposed law aimed at streamlining the financial sector.

‘Govt of the day pays the price for high inflation’

New Delhi: Apparently admitting that price rise was one of the reasons for Congress defeat in recent elections, Finance Minister P Chidambaram on Wednesday said that it was common knowledge that the government of the day pays the price for persistently high inflation.

However, he ruled out lowering of support prices for farm produce or rural wages under the UPA's flagship MNREGA to contain inflation, saying such logic is a 'specious argument' that ignores the needs of the poor.

'It is common knowledge that the government of the day will pay a price for high inflation, especially if inflation persists over a long period of time,' Chidambaram said in his inaugural address at
the Delhi Economic Conclave here.
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