Union Finance Minister P. Chidambaram on Thursday said restricting the fiscal deficit to 5.3 per cent of gross domestic product (GDP) in the current fiscal was doable.
Replying to queries during question hour in the Rajya Sabha, the Finance Minister said despite the temporary deviation from stringent fiscal consolidation targets necessitated by global financial crisis, the fiscal policy was being steered rapidly back to the path of prudence. The government had originally targeted to bring the fiscal deficit to 5.1 per cent in the current financial year, but revised it to 5.3 per cent. It was 5.9 per cent of GDP in 2011-12.
Speaking about the recently unveiled fiscal roadmap, he said he was optimistic that “we can achieve this”. As per the fiscal consolidation roadmap, government plans to bring down the fiscal deficit to 4.8 per cent in the next fiscal, 4.2 per cent in 2014-15, 3.6 per cent in 2015-16 and to 3 per cent of GDP in 2016-17.
He said the government had taken various steps towards expenditure reforms with a view to improving macro-economic environment. “It endeavours to restrict central subsidies bill in 2012-13, but some subsidy needs to be given towards food, fuel and fertilizer. The level of subsidy is determined by the economic situation,” he added.
The outgo on food, fuel and fertilizer subsidies in 2012-13 has been pegged at over Rs.1.79 lakh-crore. The government also got Parliament’s nod for an additional Rs.28,500 crore towards fuel subsidy in the supplementary grants.
Mr. Chidambaram said government’s emphasis was on eliminating effective revenue deficit by 2014-15 and generating adequate surplus thereafter. “This would also help augment resources for financing investment and capital expenditure, including grants for creation of capital assets,” he said.
He said to mitigate the adverse effects of petroleum price rise, rise in prices of other commodities and the huge crisis in global financial system during 2008-09, government had to explore suitable fiscal as well as policy options. The government had given three fiscal stimulus packages to cushion the impact of global slowdown.