NEW DELHI :
Finance minister Nirmala Sitharaman on Wednesday indicated the possibility of a fiscal slippage in the current fiscal amid a slowing economy, while maintaining that the government is up for the challenge and taking necessary measures to put the economy on a higher growth trajectory.
The Indian economy has slowed down to its lowest level in six years, growing at 5% in the June quarter. Most forecasters have slashed their growth projections for 2019-20 to below 6%, and expect the economy to have grown below 5% in the September quarter, data for which will be released on Friday.
Replying to a short-duration discussion on the state of the economy in the Rajya Sabha, the finance minister said the Narendra Modi government has been more fiscally disciplined than the earlier Congress-led UPA government.
“Quite a lot of concern has been raised by the fiscal deficit. In the July budget, I pegged it at 3.3% (of GDP). Although the FRBM Act has been there since 2004, on average, the fiscal deficit during UPA-2 was 5.5% of GDP. There are difficulties in maintaining that discipline and sometimes, it is not possible. If that’s the level of fiscal deficit they maintained, and today, even when I am facing the challenges and addressing them, the anxiety about fiscal deficit, I appreciate the anxiety, but people who ran it well above 5%, should know what is fiscal management," she said.
So far, the government has maintained that it will stick to the fiscal deficit target of 3.3% of GDP for 2019-20 and has no plans to revise it.
India Ratings on Tuesday said it expects the fiscal deficit in 2019-20 to end at 3.6% of GDP, while revising downward its growth forecast to 5.6%. “If the central government adheres to the budgeted fiscal deficit of 3.3% of GDP by cutting/rolling over expenditure, then Ind-Ra believes FY20 GDP growth could be even lower than 5.6%," it added.
“The prime minister himself is taking personal attention, giving all the time to understand the details, and taking decisions so that the economy can be better, moving towards a higher growth trajectory. I want to assure that we shall ensure that every sector and the challenges will be heard by us and we shall respond positively," said the finance minister.
However, several opposition parties including the Congress walked out of the House during the finance minister’s speech, expressing unhappiness with her response.
Congress Rajya Sabha member Jairam Ramesh in his intervention during the discussion said GDP growth has been sliding for the last eight quarters and the government needs to first acknowledge that the economy is in a difficult situation.
“Cumulative effect of demonetization, which was a political masterstroke, has cost the economy dearly. GST is a major reform, but the haste with which GST was pushed through has created many problems for trade, industry and exporters. Panic privatization by the government may yield short-term revenue, but in the medium and long term, will weaken the economy," he added.