Top policy-makers are wary of relaxing India’s fiscal deficit
Ahead of the Budget, top policy-makers are wary of relaxing India’s fiscal deficit for a second year, arguing that this would undermine the budgeting credibility the Centre has sought to establish and send out a wrong message. Not least to the central bank, which may be less willing to cut rates if the Centre eases up on fiscal discipline. The Centre is confident of providing the additional funds needed to support capital spending while meeting Seventh Pay Commission and other obligations without relaxing fiscal goals. A decision will be taken after a detailed study of the medium-term fiscal plan and debt dynamics in view of an expected slowing of nominal GDP (gross domestic product) and fresh challenges to growth globally after developments in China.In his Budget for the current year, Finance Minister Arun Jaitley adjusted the fiscal deficit timeline, extending the deadline for the 3% target — widely seen as a sustainable level — by one year to FY18.