Finance Minister P. Chidambaram said the Government would not compromise on containing the fiscal deficit, while acknowledging that the current political logjam may affect key reforms.

“There can be no compromise … on the decision to walk on the path of fiscal prudence and contain the fiscal deficit, step by step, year by year, until we reach the goal of 3 per cent of GDP in 2016-17,” said Chidambaram, while inaugurating the Delhi Economic Conclave on Wednesday.

Analysts fear that the fiscal deficit will breach the Budget target.

The deficit target for the current year is pegged at 4.8 per cent. However, with over two-thirds of the target exhausted in the first seven months, there is a feeling that the deficit will be higher.

On Tuesday, global ratings agency Fitch said the poor performance of the Congress party in the recent Assembly elections could widen the Centre’s fiscal deficit. Fitch said this was because of the “increased likelihood of political pressure to limit expenditure cutbacks”.

HSBC and Nomura both believe expenditure will be curtailed, which could affect growth in the coming years.

Financial Sector Chidambaram believes that financial sector reforms relating to the Goods and Services Tax, Direct Taxes Code, the Insurance Laws Amendment Bill and the Uniform Financial Code could be game-changers.

“Each one of them requires the building of a broad consensus. My experience has been that consensus is built after several months of hard work and then the consensus crumbles when it is hit by political opportunism,” he said.

>shishir.s@thehindu.co.in

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