Centre to meet fiscal deficit target despite PM’s New Year-eve sops: Suresh Prabhu

The Centre will meet its fiscal deficit target of 3.5 per cent of the gross domestic product (GDP) for 2016-17 despite a slew of sops announced by Prime Minister Narendra Modi last week, Railway Minister Suresh Prabhu said on Monday.

“The voluntary income disclosure scheme has already given us some revenue and this (demonetisation) scheme will also bring in some revenue so we will be able to meet the (fiscal deficit) target. The Prime Minister’s announcement will be definitely honoured in terms of ensuring fiscal adherence to all our commitments as well as fiscal prudence,” Mr. Prabhu informed the media while elaborating on the government’s anti-corruption measures days after the deadline to deposit old ₹500 and ₹1,000 currency notes in banks ended.

Relief package

Mr. Modi on Saturday announced a package for farmers, senior citizens, small entrepreneurs, women and the rural poor along with a housing scheme for the poor and the middle-class in a bid to provide relief from the impact of demonetisation of high-value currency notes which he had announced on November 8. “The government has exercised the highest form of fiscal prudence. We have met each one of our fiscal deficit targets so far,” the Minister said.

Widening deficit

The Centre’s fiscal deficit remained high at ₹4.6 lakh crore, which was 85.8 per cent of the budget estimates for the entire financial year, till the end of November this fiscal year. Till October, the deficit was slightly lower at 79.3 per cent of the full fiscal deficit target. The Union Budget had estimated fiscal deficit at ₹5.33 lakh crore for 2016-17 which works out to 3.5 per cent of the GDP. The fiscal deficit widened in November mainly due to muted gross tax revenues.

The Minister also said that high bank deposits due to demonetisation would lead to more savings that would in turn lead to higher investments. “Much of the money coming in(to) the banking system will enable banks to lend more. When money comes into the banking system, the savings rate of the economy will increase and more money will be spent on infrastructure. China has seen high economic growth because of good savings rate,” he said.