The promised fiscal consolidation pro-cess will begin from this year itself and the attempt will be to ensure the Centre’s fiscal deficit will be “as close as possible to the budgeted level of 5.1% (of gross domestic product)”, department of economic affairs secretary Arvind Mayaram told FE. He added that the Vijay Kelkar committee entrusted with preparing a new, “very clear” road map for fiscal correction will also recommend specific steps, including those required to be taken in the current year.
The committee will give its report to the finance ministry next week.
A key member of finance minister P Chidambaram’s team, Mayaram, who took over as DEA secretary on August 1, said “both direct and indirect investments” in the economy would be given a fillip through policy and administrative action. He said the Securities and Exchange Board of India (Sebi) was finalising another set of “reform measures” for capital markets in line with the objective of getting savers to look at financial instruments rather than gold or real estate. “These measures will not be delayed... You will get to hear from us in 15-20 days,” he said, without giving details. On August 16, Sebi had announced a slew of measures aimed at helping firms raise resources and persuading savers to invest in mutual funds.
Without elaborating on how the requisite spending control would be achieved (integral to which is cutting oil and nitrogenous fertiliser subsidies to curb revenue expenditure), the official said the Kelkar panel was seized of the matter.
He, however, said that fiscal consolidation would not be at the cost of the government’s own productive investments. “It is vitally important to bolster the economy’s productive capacity. While reviving investor confidence is the highest priority, the government will do its bit by pushing up its own productive investments.. Even PSU investments will be consciously encouraged,” he said.
The official conceded it would be a difficult task to meet the targetted revenue growth of 19.7% in 2012-13 given the growth slowdown, but said: “Fiscal consolidation is very much on the immediate agenda. We are looking at all options very closely and our firm commitment will be demonstrated through actions to be taken over the next few weeks.” When asked how the finance ministry viewed the prospect of prominent rating agencies stripping India of its investment grade credit rating, Mayaram said they (the agencies) would have no reason to do so as