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The recommendations of the fiscal responsibility and budget management (FRBM) panel, which had recommended a fiscal deficit target of 3 per cent of gross domestic product, for 2018-19, have been rendered obsolete by circumstances, Chief Economic Advisor Arvind Subramanian told Business Standard in an exclusive interview, a day after presenting his latest Economic Survey.
Subramanian indicated that while the upcoming budget 2018-19 will not be an outright populist document, fiscal targets have to be realistic. “The FRBM Panel’s roadmap has been rendered obsolete. The conditions were quite different when the report came out,” he said.
The panel, headed by 15th Finance Commission chairman N K Singh, and which included Subramanian as a member, had submitted its report in April 2017. It had recommended a fiscal deficit target of 2.5 per cent of gross domestic product, and revenue deficit of 0.8 per cent for fiscal year 2022-23, the end point of its six-year medium term fiscal roadmap. For 2017-18 and 2018-19, it had recommended a fiscal deficit of 3 per cent. Jaitley set a target of 3.2 per cent for 2017-18.
Subramanian did make it clear in the interview that the government should show fiscal discipline. He defended his previous economic survey which called for loosening the centre’s purse strings and said the situation was different now, with high inflation and interest rates.
Subramanian also said that he expects the nationwide Goods and Service Tax to be a three-rate tax regime within 2-3 years, as compared to a six-rate system now. “GST has done reasonably well this year. And this is early stage. Next year, I expect it to stabilise for us to be much more confident about what is going on,” he said.