“We shall leave no stone unturned in creating a vibrant India,” Finance Minister Arun Jaitley started of his Budget speech promising the country a being watchful of the current account deficit.
He said the government has to ensure anti-poverty programme is well targeted. Jaitley pegged the FY15 fiscal deficit target at 4.5 percent, but added that he will try to meet the 4.1 percent fiscal deficit target set by his predecessor. He pegged the FY16 fiscal deficit target at 3.6 percent, while for FY17 the target he is working on is 3 percent.
“My predecessor (P Chidambaram) had set up a very difficult task of reducing the fiscal deficit to 4.1 per cent of GDP in current year… the target in indeed daunting. Difficult as it may appear, I have decide to accept this target as a challenge,” he said.
The fiscal deficit which had touched a high of 5.7 per cent in 2011-12, was brought down to 4.8 per cent in 2012-13 and further to 4.5 per cent in 2013-14. The reduction in fiscal deficit by the UPA government, Jaitley said, was mainly achieved by a reduction in expenditure rather than by way of realisation of higher revenues.
Jaitley said there are challenges to lowering the fiscal deficit as the country had two years of low GDP growth, a almost static industrial growth, a moderate increase in indirect taxes, a large subsidy burden and not so encouraging tax buoyancy.
“The task before me is very challenging because we need to revive growth, particularly in manufacturing sector and infrastructure,” he said, adding choice has to be made whether or not to be victims of mere populism and wasteful expenditure. Talking about the external sector, Jaitley said there was a “turnaround” in the current account deficit (CAD) situation in 2013-14.
The CAD, which is the difference between inflows and outflows of foreign exchange, was brought down to 1.7 per cent of GDP in 2013-14, from a record 4.7 per cent in the previous year. Jaitley said he was conscious of the fact that Iraq crisis is leaving behind an impact on oil prices and that the situation in the Middle East continues to be volatile.