Deficit at 3.5% misses target by 0.3%; FM vows to bring it down

The Union government has, as usual, failed to meet its fiscal deficit target. In his last full Budget before general elections, finance minister Arun Jaitley on Thursday said the fiscal deficit will shoot to 3.5 per cent from the earlier estimate of 3.2 per cent in the current fiscal year ending 31 March.

The target for 2018-19 has been fixed at 3.3 per cent against the Fiscal Responsibility and Budget Management Act target of 3 per cent.

Expressing the government's commitment to bringing down the fiscal deficit, the finance minister said in his Budget speech that he has brought down the deficit from 4.1 per cent in 2014-15 to 3.9 per cent in the following year and further to 3.5 per cent in 2016-17.

Fiscal deficit has a bearing on sovereign rating of the country as well as the debt market.

The FRBM review panel headed by former revenue secretary N K Singh had recommended a debt to GDP ratio of 60 per cent by 2023 and a fiscal deficit at 3 per cent for the next three years.

The N K Singh panel on reviewing India's performance on fiscal discipline and suggesting a future road map has suggested a sustainable debt path must be the principal macroeconomic anchor of India's fiscal policy.

The committee has favoured combined debt-to-GDP of 60 per cent by 2023, 40 per cent for the central government and 20 per cent for state governments.

Some fiscal highlights of the budget:

• Rs80,000 crore disinvestment target for 2018-19; target for 2017-18 exceeded expectations and will reach Rs1 lakh crore
• Government will monetise select central public sector enterprises using Infrastructure Investment Trusts
• Tax buoyancy more than expected, thanks to greater compliance
• Gold monetisation scheme being revamped so that people can open gold deposit accounts without hassles