FM assurance on deficit target

New Delhi, Dec. 20: Finance minister P. Chidambaram today appeared confident about restricting fiscal deficit to 5.3 per cent of the GDP (gross domestic product) in the current fiscal.

"In my considered view it (restricting the fiscal deficit) is doable," he said during question hour in the Rajya Sabha.

The minister said the fiscal policy was being steered rapidly back to the path of prudence after a temporary deviation from targets because of the global financial crisis.

The government had originally targeted to bring down fiscal deficit to 5.1 per cent of GDP in the current fiscal but later revised it to 5.3 per cent. It was pegged at 5.9 per cent in 2011-12.

Unveiling the government's mid-year economic review earlier this week, chief economic adviser to the finance ministry Raghuram Rajan said: "The 5.3 per cent fiscal deficit target is a tough one."

The government has struggled to contain fiscal deficit, which has swelled because of costly oil subsidies and sluggish tax revenues, prompting global rating agencies to warn of a possible credit downgrade.

"Uncertainty on account of divestment receipts and likely higher subsidy requirement do make it a challenging task to adhere to the overall fiscal deficit target during 2012-13," said the mid-year economic review 2012-13 tabled in Parliament on Tuesday.

The government's estimated expenses on major subsidies, including those on food, jumped almost half to Rs 1.42 lakh crore in the first half of 2012-13. The economic review also said defence spending in the first half of the year was up 13 per cent to Rs 84,930 crore. The full-year defence budget is expected to be Rs 1,93,000 crore.

Referring to the recently unveiled fiscal road map, Chidambaram said he was optimistic that "we can achieve this".

According to the road map, the government plans to bring down fiscal deficit to 4.8 per cent of GDP in the next financial year, 4.2 per cent in 2014-15, 3.6 per cent in 2015-16 and 3 per cent in 2016-17.

The government has taken various steps towards expenditure reforms with a view to improve the macroeconomic environment, the minister said.

The Centre was committed to restrict subsidies but provisions need to be made for food, fuel, and fertiliser, the finance minister said.

"Some subsidy has to be given for food, fuel and fertiliser," he said, adding the level of subsidy is determined by the economic situation.

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