The NDA government brought down fiscal deficit and largely avoided any big slippage since it came to power in 2014. However, it could not strictly adhere to the Fiscal Responsibility and Budget Management (FRBM) Act glide path, citing structural disruptions in the economy, mainly the implementation of the Goods and Services Tax (GST). If low crude oil prices helped the government contain deficit, many policy decisions made the job difficult. Yet, by containing fiscal deficit the NDA government government won a rare rating upgrade from Moody’s Investors Service.
In his first Budget speech in July 2014, Finance Minister Arun Jaitley said that the government would retain the fiscal deficit target for 2014-15 at 4.1 per cent of gross domestic product (GDP) and reduce it further to 3 per cent by 2016-17. 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. “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 is indeed daunting. Difficult as it may appear, I have decide to accept this target as a challenge,” he said. Jaitley was able to meet the target set by Chidambaram.
In his Budget 2015-16 speech, unveiling the roadmap for fiscal consolidation, Jaitley said the 3 per cent fiscal deficit target would now be achieved in three years as against the FRBM target of two years. As per the earlier roadmap for fiscal consolidation, the deficit was to come down to 3 per cent by 2016-17. He said as per the new roadmap, fiscal deficit would be 3.9 per cent of GDP in 2015-16, 3.5 per cent in 2016-17 and 3 per cent by 2017-18. The government met its target of keeping deficit at 3.9 per cent of GDP.
In 2016-17, Jaitley stuck to his fiscal deficit target of 3.5% of GDP. However, he said he would set up a committee to review the FRBM Act to find out if a range would be better that a set of fixed numbers so that the government had the required maneuvering space. The government believed the targets were too rigid. In May 2016, the government set up a committee under former revenue secretary NK Singh to review the FRBM Act. The committee recommended that the government should target a fiscal deficit of 3 per cent of the GDP in years up to March 31, 2020 cut it to 2.8 per cent in 2020-21 and to 2.5 per cent by 2023.
In Budget 2017-18, Jaitley pegged the fiscal deficit at 3.2% of GDP and further committed to achieve 3% in the following year, 2018-19. In February 2018,
he revised the deficit target for the year ending in March 2018 to 3.5% of GDP from the targeted 3.2%. The deficit, at 3.53 per cent, turned out to be broadly in line with the government’s revision.
In his Budget speech for 2018-19, Jaitley praised the record of the government in containing the deficit, bringing it down from 4.4 per cent in 2013-14, the last year of the UPA government, to 3.5 per cent in 2017-18. “Our government assumed office in May, 2014 when fiscal deficit was running at very high levels. Fiscal deficit for 2013-14 was 4.4% of GDP. The Prime Minister and the government have always attached utmost priority to prudent fiscal management and controlling fiscal deficit. As Hon’ble members would recall, we embarked on the path of consistent fiscal reduction and consolidation in 2014. Fiscal deficit was brought down to 4.1% in 2014-15 to 3.9% in 2015-16, and to 3.5% in 2016-17. Revised fiscal deficit estimates for 2017-18 are Rs 5.95 lakh crore at 3.5% of GDP,” he said.
Jaitley set a deficit target of 3.3 per cent for 2018-19. The government’s deficit touched 114.8 per cent of the full-year estimates at the end of November, stoking concerns that the gap between the target set for FY19 and the final tally could widen.
The government had budgeted fiscal deficit of Rs 6.24 lakh crore, or 3.3 per cent of the GDP. Fiscal deficit for April-November stood at Rs 7.16 lakh crore, or 114.8 per cent of the target. It is slightly more than the 112 per cent recorded in the same period last fiscal.
While the expenditure largely remained on course, subdued tax receipts bloated the deficit. However, the government has maintained it would meet the deficit target for the financial year.
Source : Economics Times