Published: Sun, September 16, 2018
Business | By Tara Barton

Centre to ‘strictly’ maintain fiscal deficit at 3.3%: Arun Jaitley

Centre to ‘strictly’ maintain fiscal deficit at 3.3%: Arun Jaitley

On the second day of his review of the economy against the backdrop of a falling rupee and surging oil prices, the prime minister took stock of tax collections and macroeconomic indicators.

The government will stick to the fiscal deficit target of 3.3% this fiscal as it expects buoyant tax revenues and exceeding disinvestment target, Finance Minister Arun Jaitley said on Saturday.

"The govt is confident and will strictly maintain 3.3% fiscal deficit target", he said.

Government can ill-afford to lower the guard against fiscal deficit as a twin deficit problem including already high current account deficit could further dampen market confidence in the Indian economy. "Because government was in denial", the former Finance Minister said on Twitter. However, "there are some issues on which immediate action is needed", the minister said while announcing steps to increase inflow of foreign funds and check current account deficit. Also mandatory hedging condition for infra bonds will be reviewed. It is in relation to the external and commercial borrowings.

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It was chose to remove exposure limit of 20 per cent of Foreign portfolio investment (FPI) corporate bonds portfolio to a single corporate group and 50 per cent of any issuance. The current withholding tax on such bonds is 5 per cent. Jaitley also informed that restrictions on Indian banks on marketing and underwriting of Masala bonds would be removed. It also made a decision to curb non-essential imports and increase exports. The GST cuts on items like air conditioners, small televisions and washing machines announced in July has marginally depressed the combined GST receipts of union and state governments in August to Rs 93,960 crore compared to receipts in the previous month. "The commodities of which imports will be cut down will be decided after consultations with concerned ministries and will be WTO-compliant", he said. "However, the finance minister admitted that despite strong fundaments CAD has been impacted due to external factors".

He also said that GST was settling down, and the pick-up in consumption was bound to have an impact on the collections."We are quite confident that in between direct and the indirect tax collections, the government will comfortably meet the target, if not surpass it".

Jaitley's message comes a day after he outlined a slew of measures aimed at stemming a decline in the rupee - the worst-performing Asian currency this year. "It is hard to give a specific number". This comment appears to be reply to some experts who fear that the fiscal deficit will be higher than the budget target as deficit (difference between income and the expenditure of the Government) for the first four months (April-July) of the current fiscal has already exceeded 86.5 per cent.

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