Fis­cal Deficit Num­bers un­der Fo­cus of New Fi­nance Min­is­ter

The Economic Times - - Economy - DEEPSHIKHA SIKAR­WAR

Arun Jait­ley’s first day as the new fi­nance min­is­ter was marked by some tough ques­tions that he posed to of­fi­cials on key eco­nomic is­sues, par­tic­u­larly fis­cal deficit num­bers. “He wanted to know if there was any win­dow dress­ing (of fis­cal deficit num­bers),” said an of­fi­cial present at the pre­sen­ta­tion made to the min­is­ter on Tues­day. The usual prac­tice is to de­fer sub­si­dies of the fourth quar­ter of any fi­nan­cial year to the next fis­cal, added the of­fi­cial, who did not wish to be named.

Fis­cal deficit in 2013-14 was pegged at 4.6% of GDP in the re­vised es­ti­mates pre­sented in the in­terim budget and was bet­ter than the bud­geted 4.8% of GDP. The fi­nal num­bers are ex­pected by the end of this month. For­mer fi­nance min­is­ter P Chi­dambaram was cred­ited with hav­ing averted a sov­er­eign rat­ing down­grade by putting in place a strin­gent fis­cal con­sol­i­da­tion plan when he took over in Au­gust 2012. Con­sol­i­da­tion was based on sharp com­pres­sion in plan ex­pen­di­ture. A sim­i­lar ex­pen­di­ture in 201314 is ex­pected to have brought down the fis­cal deficit to 4.6% of GDP com­pared with the bud­geted 4.8% of GDP. The im­prove­ment in govern­ment fi­nances was lauded by the rat­ings agencies, but many ex­perts ques­tioned the num­bers, ar­gu­ing that the govern­ment had de­ferred spend­ing to the next fi­nan­cial year and brought for­ward some rev­enues that rightly be­longed to the next fis­cal.

“It is hardly a se­cret that this (fis­cal con­sol­i­da­tion) has largely been achieved by push­ing back ex­pen­di­ture and mov­ing for­ward tax and div­i­dend col­lec­tions,” HSBC chief econ­o­mist for In­dia and Asean Leif Ly­becker Eske­sen had said in a note af­ter the in­terim budget.

The query from the new fi­nance min­is­ter was in this back­drop.

Of­fi­cials used data from sev­eral pre­ced­ing years to point out that the sub­sidy ex­pen­di­ture for the fourth quar­ter had been de­ferred to the next fis­cal till fi­nal es­ti­mates be­come avail­able.

In their pre­sen­ta­tion to the fi­nance min­is­ter, the of­fi­cials flagged the key is­sues that re­quired his at­ten­tion in­clud­ing in­fla­tion man­age­ment, fis­cal con­sol­i­da­tion and boost­ing growth.

The of­fi­cials in the depart­ment of eco­nomic af­fairs, re­spon­si­ble for man­ag­ing the econ­omy, em­pha­sised sub­sidy re­forms in­clud­ing mar­ketlinked pric­ing for diesel.

They sug­gested step­ping up cap­i­tal spend­ing by the pub­lic sec­tor as one of the short­term mea­sures.

The pre­sen­ta­tion made to the min­is­ter also em­pha­sised the need to boost in­fra­struc­ture and man­u­fac­tur­ing.


Jait­ley, who also holds the de­fence port­fo­lio, di­rected fi­nance min­istry of­fi­cials to look at for­eign di­rect in­vest­ment frame­work for de­fence pro­duc­tion, in­di­cat­ing that he may be keen on open­ing up the sec­tor.

The cur­rent pol­icy al­lows up to 26% FDI in the sec­tor and the UPA govern­ment, af­ter much de­lib­er­a­tion, only agreed to higher amount on a case-by­case ba­sis. “This is an is­sue, which, in both limbs, would be dealt by both my de­part­ments. It has al­ready come up in my pre­lim­i­nary dis­cus­sions to­day and there­fore, I do not want to say any­thing more be­fore I look deeply into the mat­ter,” Jait­ley told the me­dia af­ter tak­ing charge as de­fence min­is­ter. Jait­ley said 26% FDI in de­fence was “in­tro­duced dur­ing the Va­j­payee govern­ment... These are ar­eas which I am per­son­ally will­ing to ex­am­ine”.

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