Govt projects fiscal deficit at 3.9 per cent of GDP in 2015-16 financial year

Union Finance Minister Arun Jaitley informed that the Government continues to adhere to the path of fiscal consolidation.

Despite the pressing need for enhanced public investment to boost the economic growth and tough commitments on account of requirements of federal structure, (greater tax devolution-- from 32 per cent to 42 per cent of the divisible pool to states), the Budget 2015-16 targeted a fiscal deficit of 3.9 per cent of the GDP, as compared to 4.0 per cent in 2014-15.

Jaitley said that India is one of the fastest growing economies of the world.

He said that the economy has witnessed significant improvement in the macroeconomic stability in terms of low levels of inflation, fiscal deficit (FD) and Current Account Deficit (CAD) among others.

The Finance Minister said that this outcome is creditable considering that the global economic situation continues to be uncertain transmitting negative spill-overs, because of which emerging markets and developing economies have, in general, become more vulnerable and fragile.

He said that the current macroeconomic outcome is far superior to that in early 2013-14 when the situation was worrisome in terms of high current account and fiscal deficits with high inflation, high interest rates and low growth.

Jaitley said that the extant robust outcome was made possible by the slew of policy measures and structural reforms undertaken by the present Government in last 19 months to address the critical problems of stimulating and stabilizing the economy.

These included measures to boost growth through enhanced public investment, kick starting stalled projects, improving the status of financial inclusion significantly, improving governance through systemic changes like open auction for natural resources like coal and spectrum, monetary policy framework and greater fiscal federalism and improving business environment through reforms in policies and regulation among others.

Addressing the Third Meeting of the Consultative Committee attached to the Ministry of Finance on the subject of ‘State of Economy’ here ,  Jaitley said that the macroeconomic outcome in India in the current juncture is one of consolidation of the economic recovery evidenced in recent years.

Jaitley further said that India clocked 7.3 per cent growth rate in Gross Domestic Product (GDP) in the year 2014-15, higher than 6.9 per cent growth achieved in 2013-14 and 5.1 per cent in 2012-13; showing that India is firmly on the path of economic revival.

This growth compares favourably with the growth of 3.4 per cent achieved by the global economy and 4.6 per cent by the emerging markets and developing economies as a block in the year 2014.

The Finance Minister further said that the GDP growth was 7.2 per cent in the First Half (H1) of 2015-16 as against 7.0 per cent in the second half of the last year.

Growth has also improved from 7 per cent in the first quarter (Q1) of 2015-16 to 7.4 per cent in Q2 of the current fiscal.

Viewed sector-wise, the pick-up in the growth of manufacturing sector can boost overall growth both directly and indirectly because of the substantial backward and forward linkages that the sector has. The manufacturing growth has improved from 6.1 per cent in H2 2014-15 to 8.2 per cent in H1 2015-16. The service sector growth has been robust at 8.8 per cent during H1 2015-16.

The Finance Minister said that the fiscal outcome has been promising this year so far. Gross tax revenues increased by 23.1 per cent during April- October 2015-16 in comparison to the corresponding period in the previous year, which was mainly led by a buoyant growth in indirect taxes.

The Union Budget 2015-16 estimated a growth in capital expenditure of 25.5 per cent. Against this, during April-October 2015, the growth in capital expenditure on plan account has been 61.3 per cent; while, the total capital expenditure grew by 31 per cent. Increased public investment, reflected in capital expenditure, is likely to promote private investment and growth.

Fiscal deficit during April-October 2015-16 has been Rs. 64,505 crore lower than that in the corresponding period of the previous year.