A day after Reserve Bank of India (RBI) governor Shaktikanta Das sought to allay fears of the Budget proposal on fiscal slippage causing a spike in inflationary pressure, finance Minister Nirmala Sitharaman reiterated on Sunday that the Budget 2020-21 has nOt violated the fiscal discipline.
Addressing a gathering of industry representatives here, she said, “We have not really breached the FRBM. We have not gone outlandish on it. We have kept fiscal discipline, which is a USP for both the Atal Bihari Vajpayee and Narendra Modi governments.”
Speaking to reporters, alongside Sitharaman, after a meeting of the RBI board in New Delhi on Saturday, Das too had said the government had largely remained within the deficit road map set by the Fiscal Responsibility and Budget Management (FRBM) Act.
Acknowledging that the FM hadn’t really succumbed to the temptation to launch a fiscal stimulus to pump-prime the economy, former RBI governor D Subbarao wrote in The Indian Express on February 12, “ It has long been known that the true fiscal deficit is higher than what the government’s books show. To her credit, the finance minister took a step towards transparency by admitting to off-balance sheet borrowings of 0.8 per cent of GDP for both the current and next fiscal years — acknowledging that the fiscal deficit would actually be higher at 4.6 per cent and 4.3 per cent of GDP respectively. This is already excessive. Add to this the unrealistic projections of revenue growth and disinvestment proceeds for next year and we have a potentially unsustainable fiscal situation. Any stimulus on top of this would have been clearly unwarranted, and for many reasons”.
Invoking an escape clause, the Budget FY21 proposed to inflate fiscal deficit by 50 basis points for this fiscal and the next to 3.8 per cent and 3.5 per cent of GDP, respectively, amid a sharp cut in the corporate tax rate and a shortfall in revenue mop-up following a broader economic slowdown.
On the Budget, the FM said several novel measures have been initiated to address the demand side and allocations have been made to enhance consumption.
She said capital-stressed MSMEs were offered additional terms loans through their respective banks and given them additional working capital.
On the GST, she said from April 1, a “simplified regime” will begin also to ease technical glitches, if any (thanks to the new, simplified monthly returns). She asked the Central Board of Indirect Taxes and Customs to reach out people and clarify their doubts.
She also said the Centre is trying to reduce the dependence of the pharma industry on active pharmaceutical ingredient (APIs). “We were at one point of time dominant producers of API. Today, we don’t any of them left. The government of course is spending a lot of time on how best we can encourage production of the API … So, some work is going on partly addressing the issue.” —FE
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