Even as concerns have been raised over the government missing its fiscal deficit target this year, Finance Minister Arun Jaitley on Saturday reiterated that the Centre will be able to meet the goal next year, and that revenue mobilisation for next year looks more comfortable.
“I see the next year to be reasonably more comfortable as far as revenues are concerned and therefore at this stage I can’t say that there will be any slippage. I am sure we will be able to maintain the target quite well,” Jaitley said, while speaking to the media after addressing the Central Board of Directors of the Reserve Bank of India.
On the question if rising oil prices will have an impact, he said that not too much should be looked into hypothetical factors such as a possible rise in oil prices as no one expected whatever happened over the last three days. Touching upon the impact of oil prices, RBI Governor Urjit Patel said that while we need to be prepared for oil price movements on the either side, it is difficult to predict anything. “It is just very difficult… Few months ago, around June, people were talking of oil prices not going above $40-45 per barrel and some of the advice that came to the MPC and RBI was based on that. That has turned out to be wrong,” said Patel.
The finance minister also expressed his optimism on credit growth in the economy and said that there are indications to show that it is picking up and “it seems to be a good sign.” He further added that the recapitalisation of banks will itself improve the capacity. Another factor he pointed out that will lead to credit growth is the increased reliance on the bond markets now. “I had a meeting with the Sebi Board and one of the factors that stood out in the presentation was that there is also now an increased reliance on the bonds market,” the finance minister said.
Speaking on the issue, the RBI Governor added that as the capital market raising in the system has also gone up substantially, we will have better debt to equity ratio going forward. While the finance minister had in his Budget speech announced to increase the minimum support price by 1.5 times of the production cost, he said that the issue of MSP came up in the meeting with RBIs Central Board of Directors. “There was a discussion on how it should be implemented and what could be its result. Issues such as impact of MSP on the farmers and overall prices and global competition also came up,” said Jaitley without elaborating further.
Answering a question on whether he shares the concerns on high equity prices, expressed in the Economic Survey, the RBI governor said that even as there is not a broader feeling (both globally and in India) that this bubble can lead to a major problem. “As financial market regulators, both RBI and Sebi need to be cognizant of the risk going forward…. The good thing in this cycle of high equity prices is that almost everyone who is a part of it has talked about the possibility that this can’t go on for too long and I think that’s good. The risk aversion is endogenously built up by investors themselves,” said Patel.