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Arun Jaitley says revival on track, macros show improvement

Govt may increase capital expenditure by nearly `20,000 crore annually.

By: ENS Economic Bureau | New Delhi | Updated: August 13, 2015 1:59:00 am

Finance minister Arun Jaitley has expressed hope, saying that the macro-economic scenario has improved significantly with lower inflation and a revival in economic growth. He exuded confidence that interest rates would be eased gradually.

However, while stressing on its commitment to fiscal consolidation, government has projected a marginal rise in subsidy payouts over the next two fiscals and is also planning to expand capital spending to boost economic growth.

“Macro-economic outcomes have improved significantly, primarily with the revival of economic growth and the subsidence of inflationary tendencies….With government’s focus on improving household savings, fiscal consolidation and investment facilitation, saving-investment scenario is expected to improve considerably,” Jaitley said in the Mid-Term Expenditure Framework statement tabled in Parliament.

He also laid out the government’s indication to increase capital expenditure by nearly Rs 20,000 crore annually in the next two fiscals, and taking up the total government spending to Rs 20,64,155 crore by 2017-18.

According to projections in the report, the capital expenditure would be hiked to Rs 2,60,967 crore in 2016-17 from Rs 2,41,430 crore in the Budget estimate of 2015-16. Capital spends is projected to be further increased to Rs 2,84,541 crore in 2017-18.

However, the Expenditure statement has projected higher subsidy bill over the next two fiscals though Jaitley stressed that it is essential to reduce expenditure on subsidy through reforms in order to lower the fiscal deficit.

The food subsidy is expected to rise to Rs 1,32,000 crore in 2016-17 ad Rs 1,41,000 crore in 2017-18 from the estimated Rs 1,24,419 crore this fiscal. A marginal rise of Rs 2,000 crore annually is also expected in the petroleum subsidy bill taking it to Rs 34,000 crore in 2017-18 from the projected Rs 30,000 crore this fiscal. Fertiliser subsidy too is projected to rise to Rs 75,000 crore next fiscal and Rs 80,000 crore in 2017-18 from the estimated Rs 72,969 crore this fiscal.

GDP has improved from 6.9 per cent in 2013-14 to 7.3 per cent in 2014-15. It’s expected to be 8-8.5 per cent in the current financial year.

On price situation, he said the headline WPI inflation averaged (-) 2.4 per cent during April-June 2015. “With fiscal deficit coming down, and easing of inflationary pressure, it’s expected that interest rates would be falling in years to come,” he said, adding that the fiscal deficit would be lowered to 3.5 per cent in 2016-17.

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