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Budget 2018: FRBM fiscal deficit road map obsolete last year - CEA

Conditions were different when report came out; Budget won't be outright populist, govt must show fiscal discipline, says CEA

Arup Roychoudhury & Indivjal Dhasmana  |  New Delhi 

Chief Economic Advisor Arvind Subramanian
Chief Economic Advisor Arvind Subramanian. Photo: Dalip Kumar

The recommendations of the fiscal responsibility and management (FRBM) panel, which had recommended a target of 3 per cent of gross domestic product, for 2018-19, have been rendered obsolete by circumstances, told Business Standard in an exclusive interview, a day after presenting his latest

Subramanian indicated that while the upcoming 2018-19 will not be an outright populist document, fiscal targets have to be realistic. “The Panel’s roadmap has been rendered obsolete. The conditions were quite different when the report came out,” he said.

The panel, headed by chairman N K Singh, and which included Subramanian as a member, had submitted its report in April 2017. It had recommended a 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 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 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.

First Published: Tue, January 30 2018. 15:02 IST