Sending a strong signal to international credit rating agencies and domestic and foreign investors about the UPA government’s resolve to put the economy back on high growth trajectory, finance minister P Chidambaram is set to surpass his own target in reining in fiscal deficit for the current financial year.
It will be “a little above 5.2 per cent” as against the revised target of 5.3 per cent of the GDP, according to sources.
Coupled with further fiscal consolidation measures that are likely to be unveiled in Chidambaram’s Budget Speech next week, the better-than-expected fiscal deficit for FY 2012-13, said sources, will have a positive impact on the inflationary trend and address the concerns of the Reserve Bank of India that may ease its current anti-inflationary monetary policy stance leading to further cuts in interest rates.
Ahead of the general elections in 2014, it is the last full Budget of the UPA government. Ruling out the possibility of a pre-election populist Budget, a senior government functionary told The Sunday Express, “Unlike pre-election Budgets in the past, which were marked by populist bonanzas to please different sections of the people, the coming Budget will aim at bringing investments into the country, which will create jobs for the people. Everybody has a stake in a stable economy with high growth prospects.”
While Chidambaram’s predecessor Pranab Mukherjee had overshot the fiscal deficit target of 4.6 per cent in the last financial year by a huge margin — it ended up at 5.9 per cent of the GDP — there were many sceptics who did not expect the incumbent finance minister to even meet the revised target of 5.3 per cent in the current fiscal.
Sources said that a string of measures like cuts in non-essential spendings by different ministeries, discouraging parking of funds, near-realisation of non-tax revenue goals, and rationalisation of subsidies, among others, went behind the achievement of fiscal deficit target this year.
That the ruling party leadership had come around to realising the gravity of the challenges on the economic front was evident at the recent pre-Budget consultation that the finance minister had with Congress office-bearers at the party headquarters here.
It marked a departure from the past when such consultations would invariably end up in a chorus of demands from for populist schemes. In fact, ruling party leaders even refrained from criticising the recent supposedly unpopular decisions of the government, namely the hike in rail fares,