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Modi Government has assured that fiscal deficit for the current year will be within the budget target which is 3.3 per cent of GDP (Gross Domestic Product). The Government also made it clear there will be no cut in development expenditure.
These assurances were given after the Prime Minister Narendra Modi reviewed the economic situation with the Finance Minister Arun Jaitley and other senior Cabinet Ministers. Secretaries of Finance Ministry and other Ministries were also present. This was second successive days of high level meeting on economy. The Government went into huddle on Friday and announced five measures to support falling rupee. On Saturday, the meeting reviewed revenue and expenditure positions. The Finance Minister informed that Prime Minister expressed his satisfaction to broad parameters of economy and macroeconomic data.
"The government is confident and will strictly maintain the 3.3 per cent fiscal deficit target," Jaitley told reporters after the meeting. This comment appears to be reply to some experts who fear that the fiscal deficit will be higher than the budget target as deficit (difference between income and the expenditure of the Government) for the first four months (April-July) of the current fiscal has already exceeded 86.5 per cent. Though it is less than 92.4 per cent of the last fiscal, but problem is that revenue from Goods and Services Tax (GST) is below expectations and being the election year, expectation that there will be more expenditure.
Tax collections
The Minister said that black money measures such as demonetisation and GST have had their effect on direct tax collections. Direct tax collections will be in excess of budget target. There is a phenomenal increase in assesses base. He claimed that GST is settling down. “Pick up in consumption will have impact on GST collections. Govt will meet the target if not surpass it,” he said.
The Government not only assured on the fiscal deficit but also claimed that growth will be much better. "We will have a growth rate higher than what we'd projected earlier this year in the budget," Jaitley said while adding that there will be no capital expenditure which means growth will not have to face any hurdle. He also assured that inflation would be broadly under control.
Ways to rein rupee
On Friday, the Minister outlined a slew of measures aimed at stemming a decline in the rupee - the worst-performing Asian currency this year. These include:
* Import curb on non-essential items, specific items to be announced later
* Review removal of exposure limit of 20 per cent of Foreign Portfolio Investors’ (FPI) corporate bond portfolio to a single corporate group and 50 per cent of any issue of corporate bond
* No withholding tax on Masala Bonds issued during current fiscal. There will be removal of restrictions on Indian Banks including restrictions on underwriting of Masala Bonds
* Manufacturing firms will be able to avail loans up to $ 50 million with a maturity of one year
* Review of mandatory hedging condition for infrastructure loans as already touched 86.5 per cent of the full year's target of Rs 6.24 lakh crore. On August 31, the Controller General of Accounts (CGA) said the fiscal deficit for April-July was Rs 5.40 lakh crore.
The Government hoped that these measures will have impact up to $10 billion and bring some stability in rupee.
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