FM Arun Jaitley vows fiscal discipline, investors weigh budget deficit slippage

Jun 02 2014, 12:05 IST
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SummaryArun Jaitley said pulling India out of its current malaise would involve 'fiscal rectitude as combination of monetary, fiscal policy.'

Finance minister Arun jaitley vowed on Sunday to uphold fiscal discipline, despite pressure on public finances from figures showing the economy grew by less than 5 percent in the fiscal year just ended.

Investors are looking to see whether Arun Jaitley, also handed the defence portfolio in Prime Minister Narendra Modi's new government, will allow some slippage on the budget deficit when he presents his first budget in early July.

In a post on his Facebook page, Arun Jaitley said pulling India out of its current economic malaise would involve "fiscal rectitude as (a) combination of monetary and fiscal policy.

"Slower GDP growth will imply lower tax buoyancy and (a) higher fiscal deficit," he added. "We must move towards an era of fiscal discipline where we can reduce the fiscal deficit, contain inflation and improve upon our growth rates."

Figures on Friday showed that India's economy grew by 4.7 percent in the year to the end of March, too slow to generate enough jobs for the 10 million young people who enter the workforce each year.

Weak growth has fueled speculation that Jaitley may revise up the federal fiscal deficit of 4.1 percent of gross domestic product originally targeted in his predecessor's interim budget in February.

Jaitley did not name any deficit numbers, but said he would target fiscal discipline in the near term so as to maximise India's growth potential over the longer run.

"We must commit ourselves to this discipline," he wrote.

"Short term discipline till we reverse present trend will give us long term benefits."

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