New Delhi, March 14: The government today said it would strive to reduce the fiscal deficit to 3 per cent of GDP within the next four years.
Replying to a debate on the budget, finance minister P. Chidambaram said though the fiscal deficit had been contained at 5.2 per cent of GDP (gross domestic product) for the current fiscal, “it is still very high, we cannot sustain this ... we have to bring it down”.
Chidambaram said the government was committed to a path of fiscal consolidation and said it would keep the deficit at 4.8 per cent of GDP in 2013-14 and bring this down to 4.2 per cent in the next year. In the following years, it would be brought down to 3.6 per cent and in 2016-17, it will come down to to 3 per cent of GDP.
The finance minister pointed out that the growth in the previous years had come at the expense of rising fiscal deficit, helping to fuel inflation and it was necessary to “balance growth with fiscal prudence”. He said the stimulus packages provided after the global financial crisis of 2008-09 resulted in growth but also brought high fiscal deficit.
The government was virtually forced into a policy of fiscal prudence after global credit rating agencies such as Moody’s and Standard & Poor’s threatened to downgrade the Indian economy beset with widening fiscal deficit, growing trade deficit and a falling rupee.
Subsidies will be pared to Rs 2.31 trillion next year from Rs 2.57 trillion which the government ran up this year, a compression of 10 per cent on what many see as populist spending on fuels, food and fertilisers. The main axe will fall on oil subsidies which are being reduced 26.8 per cent.
Chidambaram said the focus of his budget was on containing the fiscal deficit that could lead to a macro-economic disaster if not checked. “I sincerely appeal to all members to support the path of fiscal consolidation.”
He said despite the stress on fiscal consolidation, the government had not cut the allocation of any ministry.
“No ministry or department has been given less than what it was given last year,” he said.
All departments were being asked to bring before the cabinet their detailed notes on expenditure in April itself, so that they could spend their allotted money within the fiscal, Chidambaram said.
The government has sent tax notices to over 1 lakh people who have are registered as tax-payers but have not filed any returns.
“A polite letter was sent to 35,000 such persons in the first lot. Two weeks ago we have sent letters to another lot of 35,000 persons. Today letters are being issued to a third lot of 35,000 persons,” Chidambaram told reporters today.