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  3. No reason to doubt govt's commitment on fiscal targets: RBI Governor

No reason to doubt govt's commitment on fiscal targets: RBI Governor

19 Feb 2020 Evaluate

Reserve Bank of India (RBI) Governor Shaktikanta Das has thrown his weight behind Finance Minister Nirmala Sitharaman's budget numbers and said that he has no reason to doubt the government’s commitment to meet the fiscal deficit target of 3.5 per cent of GDP for 2020-21. Das stated the government has remained within the limits set by the Fiscal Responsibility and Budget Management (FRBM) Committee for the budget deficit. He said so, the excess fiscal deficit has been restricted to 0.5 per cent. The government has adhered to that and a large part of the financing of fiscal deficit next year will come from small savings.

The FRBM committee headed by N K Singh had recommended fiscal deficit to be cut to 2.8 per cent in 2020-21 fiscal and to 2.5 per cent by FY2023. The panel had suggested an 'escape clause' in case of overriding consideration of national security, acts of war, calamities of national proportion and collapse of agriculture severely affecting farm output and incomes. Under this, a deviation from the stipulated fiscal deficit target can be taken but not in excess of 0.5 percentage points in a year.

Sitharaman missed deficit target for the third year in a row, pushing shortfall to 3.8 per cent of the GDP in the current fiscal as compared to 3.3 per cent previously planned. The fiscal deficit target for the coming fiscal year starting April 1, has been fixed at 3.5 per cent. The fiscal deficit is the shortfall in a government's income compared with its spending. It essentially means that the government is spending beyond its means.

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