Fiscal on course to meet target
The government is confident of wiping out the revenue deficit and reducing the fiscal deficit to 3 per cent of the gross domestic product (GDP) by 2008-09. It, however, admits it faces a challenge on maintaining low inflation with reasonable interest and exchange rates.
"We are on track to bringing down the fiscal deficit to 3.3 per cent this year and to 3 per cent in the next year and hopefully remove the revenue deficit in 2008-09", Finance Secretary D Subbarao said in a speech at the launch of the first economic survey of the Indian economy by the Organisation of Economic Cooperation and Development (OECD).
The Fiscal Responsibility and Budget Management (FRBM) Act stipulates that the government will wipe out the revenue deficit by 2008-09 and bring down the fiscal deficit to 3 per cent of GDP.
Subbarao said the government was faced with the challenge of maintaining the impossible trinity of a competitive exchange rate, suitably low interest rate and a soft inflation regime. The Indian economy also faces the challenge of pushing agriculture growth to 4 per cent during the Eleventh Plan period (2007-12), expanding employment opportunities, improving service delivery and governance, and building world-class infrastructure.
OECD secretary-general Angel Gurria said India’s long-term growth prospects would be bolstered by continuing the current fiscal consolidation. He also argued for extending the FRBM Act for five more years.