Subsidy savings set to boost infrastructural growth

Government is expected to save an estimated Rs 30,000 crore on Rs 2,40,000-crore subsidy bill, which can be used to reach fiscal deficit target.

The government, which is expecting a lower subsidy bill — than the Rs 2.44 lakh crore projected in this year’s budget — on account of low crude prices globally, could use the “saved” amount for other development projects especially in the cash-starved infrastructure sector.

As per estimates, the government could save up to Rs 30,000 crore or even more, which is also likely to help the government in achieving the fiscal deficit — the difference between government revenue and expenditure — target pegged at of 3.9% for 2015-16.

“We would have some advantage as the global crude prices have softened and this will allow the government some elbow room to use that fund in other productive areas,” a senior government official told HT.

The government has already increased the recapitalisation amount for public sector banks this year from Rs 7,940 crore in the budget to Rs 25,000 crore.

“The (fiscal) deficit targets will be met, with any surplus available likely to be used for infrastructure investment,” said Arvind Virmani, mentor to Ficci and former chief economic adviser.

Outlining the roadmap for fiscal consolidation, the NDA government has fixed the fiscal deficit target for the current financial year at 3.9% of GDP and plans to reduce it to 3.5% in 2016-17 and 3% in 2017-18. Jaitley had earlier said that the government would not compromise on building public infrastructure and irrigation.

DK Joshi, chief economist, Crisil echoed the same sentiment and said while the government would “easily be able to achieve its fiscal deficit target” for the current financial year, “it is to be seen whether the government decides to better the fiscal deficit target or keep it as it was pegged and use the additional amount of money for other purposes”.