Govt targets 3.2% fiscal deficit for FY18

New Delhi: Moving ahead with the fiscal consolidation path, Finance Minister Arun Jaitley has pegged the fiscal deficit for 2017-18 at 3.2 per cent, down from 3.5 per cent expected in the current financial year.

"I have pegged the fiscal deficit for 2017-18 at 3.2 per cent of GDP and remain committed to achieve 3 per cent in the following year. With this gradual approach, I have ensured adherence to fiscal consolidation, without compromising the requirements of public investment," he said in the Budget speech.

Addressing a media conference after the Budget presentation, the Finance Minister said the Budget estimate for fiscal deficit was 3.5 per cent for 2016-17 and revised estimate is also 3.5 per and it will be achieved.

Fiscal deficit is the difference between Revenue receipts plus Non-debt Capital Receipts (NDCR) and total expenditure. This indicates the total borrowing requirements of Government from all sources.

Fiscal deficit of 3.2 per cent in absolute terms for the next fiscal comes out to be Rs 5,46,532 crore. The total expenditure in Budget for 2017-18 has been placed at Rs 21.47 lakh crore.

"With the abolition of Plan-Non Plan classification of expenditure, the focus is now on Revenue and Capital expenditure. I have stepped up the allocation for Capital expenditure by 25.4 per cent over the previous year. This will have multiplier effects and lead to higher growth," he said.

The total resources being transferred to the States and the Union Territories with Legislatures is Rs 4.11 lakh crore, against Rs 3.60 lakh crore in BE 2016-17, he added.

Talking about the FRBM Review Committee, he said, the Committee has done an elaborate exercise and has recommended that a sustainable debt path must be the principal macro-economic anchor of the fiscal policy.

The Committee has favoured Debt to GDP of 60 per cent for the General Government by 2023, consisting of 40 per cent for Central Government and 20 per cent for State Governments, he said.

"Within this framework, the Committee has derived and recommended 3 per cent fiscal deficit for the next three years. The Committee has also provided for ‘Escape Clauses’, for deviations upto 0.5 per cent of GDP, from the stipulated fiscal deficit target. "Among the triggers for taking recourse to these Escape Clauses, the Committee has included 'far-reaching structural reforms in the economy with unanticipated fiscal implications' as one of the factors, he said.

The Report of the Committee will be carefully examined and appropriate decisions taken in due course, Jaitley said, adding, "although there is a strong case now to invoke this Escape Clause, I am refraining from doing so."

Nevertheless, the Finance Minister said he had taken note of the fiscal deficit roadmap of 3 per cent recommended by the Committee for the next three years.

"I have taken into consideration the need for higher public expenditure in the context of sluggish private sector investment and slow global growth. I have kept in mind the recommendation of the Committee that a sustainable debt should be the underlying basis of prudent fiscal management."

With regard to the Revenue Deficit, Jaitley said it has reduced to 2.1 per cent in the current fiscal from the Budget estimate of 2.3 per cent. The Revenue Deficit for next year is pegged at 1.9 per cent, against 2 per cent mandated by the FRBM Act, he said.

"It will be our endeavour to improve upon these fiscal numbers, especially the fiscal deficit, in the next year, through greater focus on quality of expenditure and higher tax realisation from the huge cash deposits in Banks, triggered by demonetisation," he said.