Committing to contain fiscal and current account deficits, Finance Minister P Chidambaram has said that the government will not hesitate to take difficult decisions to keep them under check.

“The government is committed to the path of fiscal consolidation and has drawn red lines for the two deficits (fiscal and current account). We shall not allow the red lines to be breached under any circumstances, and we shall remain within the red lines. We are prepared to take difficult decisions in this regard, should the need arise,” he said.

Chidambaram said this during an intervention at the IMF Committee plenary meeting here yesterday.

The government proposes to bring down fiscal deficit, an indicator of government borrowing, to 4.8 per cent of the GDP in 2013-14 from 4.9 per cent a year ago.

As regards the Current Account Deficit (CAD), Chidambaram had earlier said that all efforts would be made to contain it at 3.7 per cent of the GDP or $70 billion in the current fiscal. The CAD, which is the difference between inflow and outflow of foreign exchange, had touched an all time high of 4.8 per cent of the GDP or $88.2 billion a year ago.

Admitting that the government policies are directly responsible for the fiscal deficit and current account deficit, Chidambaram said, “Necessary measures have been initiated to contain the fiscal deficit and the current account deficit.”

Going forward, he said, “The commitment is to bring down the fiscal deficit to 3 percent by 2016-17.”

Measures to check inflation

Another major challenge facing the Indian economy was persistent inflation, Chidambaram said, adding “we have taken measures to bring inflation down through a mix of demand-side and supply-side policies.”

Noting that the Indian economy had suffered significant downturn this year, he said the government had taken host of steps to ease supply constraints, improve investment climate and put the economy on the path of sustainable growth.

“Projects amounting to more than $64 billion have been cleared in the last few months. Once these projects come on stream, they should have an all-round salutary effect,” the Minister said.

India’s growth rate during 2012-13 slipped to decade’s low of 5 per cent and during the first quarter of the current fiscal, the economy recorded a modest growth of 4.4 per cent.

The government, however, is maintaining the growth in the current fiscal would be between 5 to 5.5 per cent.

(This article was published on October 13, 2013)
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