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  3. No compromise on fiscal consolidation; fiscal deficit to contain within target limit: Chidambaram

No compromise on fiscal consolidation; fiscal deficit to contain within target limit: Chidambaram

12 Dec 2013 Evaluate

Amid rising concerns over the country’s fiscal deficit touching around 84 percent of budget target in the first seven months of the current fiscal, Finance Minister P Chidambaram has said that the government will stick to the path of fiscal consolidation and contain the fiscal deficit step by step, year by year, until the country reaches the goal of 3 per cent of GDP in 2016-17. The government has set a fiscal deficit target of 4.8 percent of GDP for the current financial year.

Highlighting the need to focus more on revenue deficit, Chidambaram has reiterated that borrowing should finance investment and not consumption. Recently, the rating agency Fitch has said that poor performance of the Congress in the recent assembly elections could push up the Centre's fiscal deficit as it could potentially raise political pressure on the government's near-term fiscal goals. On the other hand, Chidambaram has asserted several times that the red line of 4.8 percent of GDP for the fiscal deficit will not be breached.

In order to contain the country's fiscal deficit, the government has been taking a number of measures including banning government departments for holding meetings in 5-star hotels among others to cut government spending in non-critical areas. Finance Minister P Chidambaram had also said that the government can reduce spending soon by some large government departments despite up coming national election. Furthermore, the government has also expressed confidence to meet the divestment target of Rs 40,000 crore for current fiscal. However, during the first seven months, the government was able to garner only about Rs 1,150 crore through disinvestment. In the previous financial year, the government was able to contain the fiscal deficit at 4.89 percent of GDP, against the budgeted target of 5.1 percent of GDP.

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