Finance Secretary Arvind Mayaram has defended the government’s budget target to contain fiscal deficit at 4.1% of GDP in current fiscal to be achievable. During budget 2014-15, the government has stated that it will focus on attracting investment rather than reining in spending in order to balance India`s books and revive a weak economy, an approach that fell short of expectations of rating agencies.
Mayaram added that the government would be able to exceed the $9.7 billion divestment target in current fiscal by selling government stakes in both state-owned and private companies as India`s stock markets were stronger this year than they had been last year. By adding further, he said the government is taking measures for increasing investments in the country to boost economic growth which in turn will enhance tax revenue for the government.
India’s fiscal deficit narrowed to 4.5% of GDP in the financial year 14, as compared to 4.89% of GDP in the FY13. High fiscal deficit has adverse impact on country’s economy as it leads to three macro economic problems such as a balance of payments crisis, high interest rates because of crowding out and high inflation owing to the currency depreciation.