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Finance Minister Arun Jaitley on Monday re-affirmed the government’s commitment to follow the fiscal deficit roadmap and meet the 3.2 per cent target for 2017-18.
“We are following the roadmap of fiscal consolidation under which the fiscal deficit, as a ratio of GDP, stood at 3.9 per cent in 2015-16 and 3.5 per cent in 2016-17 and is budgeted to be 3.2 per cent for the current financial year,” he said at a pre-Budget meeting with economists.
His comments come at a time when government finances are under pressure with uncertain tax collections that have not kept pace with expenditure. The fiscal deficit between April and October this year rose to 96.1 per cent of the Budget Estimate.
Jaitley also expressed confidence in the economic situation after demonetisation and rollout of the Goods and Services Tax and said the second quarter GDP growth marks the reversal of the declining trend of growth witnessed in the last few quarters.
“Despite subdued global economic growth, India’s growth remains impressive and one of the best in the world during the last three years,” he said in an official release.
Most economists also supported the plan to follow the fiscal consolidation roadmap and said that any shortfall in the target should be clarified by the government.
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“I think there is a political commitment to stick to the fiscal deficit target. I reinforced that. I am sure they will. I said that we understand that there is a genuine commitment to maintain the fiscal deficit and revenue deficit targets. Operational constraints may vary but political commitment is there,” said Rathin Roy, member Economic Advisory Council to the Prime Minister, after the meeting.
Others suggested giving more remunerative prices to farmers keeping the inflation target in mind, announcing a road map for tax reforms in the Union Budget 2018-19 and providing more incentives for infrastructure investment as well as to small and medium enterprises and construction sector.
“The amount (for social security pension) has been ₹200 a month. This is totally unacceptable. There is no reason to keep it so low. So, make it at least ₹500, I would say even ₹1,000, if possible and increase the coverage,” said economist Jean Dreze , adding that he had also called for full-fledged implementation of maternity entitlements.
Economists also urged lowering the corporate tax rate to 20 per cent with removal of exemptions and suggested to tax Long Term Capital Gains to bring equity and raise revenue, reduce MAT (Minimum Alternate Tax). They also proposed that the government should announce a fresh roadmap for GST including the convergence of rates.
Economists including Surjit S Bhalla MD, OXUS Investment, Ajit Ranade, Chief Economist, Aditya Birla Group, Majoj Pant, Director, IIFT, Arvind Virmani, President, Forum for Strategic Initiative, Shekhar Shah, Director General, NCAER attended the meeting along with senior Finance Minister officials.
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