The Telegraph
Sunday , December 16 , 2012
Since 1st March, 1999
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Stress on checking fiscal deficit

New Delhi, Dec. 15: The finance ministry today emphasised the need to rein in fiscal deficit at 5.3 per cent of the gross domestic product and take steps towards fiscal consolidation to attract investments.

“There’s little room for fiscal deficit a fiscal path that is credible is the next important step so that we win back the confidence of our investors,” chief economic adviser Raghuram Rajan said at an event organised by industry chamber Ficci.

He expressed hope that the increased buoyancy in the stock markets would prompt businesses to start investing more. “Business is sitting on a lot of cash. If they start investing some of that, the momentum starts picking up,” he said.

Rajan maintained that the government was reaching limits on providing fiscal or monetary stimulus. “The need of the hour was to improve investor confidence and create better environment for achieving a sustainable growth,” he said.

The budget for 2012-13 pegged fiscal deficit at 5.1 per cent of GDP. However, in view of a lower-than-expected revenue realisation and increased subsidy outgo, the finance ministry is expecting the fiscal deficit to go up to 5.3 per cent during 2012-13.

In order to finance the 5.1 per cent deficit, the government had planned to borrow Rs 5.7 lakh crore. A higher fiscal deficit of 5.3 per cent translates into an additional market borrowing of Rs 20,000 crore. The fiscal deficit scenario worsened for the government on account of lower tax realisation and poor response to the divestment programme.