Finance minister Arun Jaitley on Thursday said India won’t press the pause button on fiscal consolidation, but hinted fiscal glide path could be recalibrated in future. Addressing the Asia-Pacific meeting organised by Morgan Stanley in Singapore, Jaitley said: “No pause (on fiscal consolidation) but challenges arising from structural reforms… could change the glide path.”
Already, the NK Singh-led FRBM committee has suggested that the Centre’s aim for a fiscal deficit of 3 per cent of the GDP for three straight years starting the current financial year itself and gradually reduce it to 2.5 per cent by 2022-23. It, however, suggested an escape clause under exceptional circumstances, but restricted the fiscal slippage to 0.5 percentage point a year.
The Centre is targeting fiscal deficit of 3.2 per cent of GDP in 2017-18, lower than 3.5 per cent in the last fiscal.
The finance minister also said recapitalisation of public-sector banks (PSBs) will be linked to strict performance parameters. He indicated that the government is looking at “one or two instances of consolidation” in the public-sector banking space over the next 12 months.
The government last month announced a 2.11-lakh-crore capital infusion into PSBs struggling with a bad loan crisis.
On elusive private investments, Jaitley expressed confidence that the situation would reverse for the better. “Investments have been slow because of surplus capacity but a combination of a better global economy, bank recap and FDI and public investments should help improve private capex,” he said.
PSBs will be encouraged to lend to micro, small and medium enterprises, Jaitley was quoted saying in a press release issued by Morgan Stanley. The finance minister identified two areas of focus for his party: “One, to build rural India (housing, roads, electrification, sanitation, education and health) and two, to build national infrastructure”. He also said the country’s ranking in the World Bank’s ease of doing business will be improved further. India jumped an unprecedented 30 notches in the latest ranking to secure 100th position. FE