Budget 2016: Finance Ministry commits itself to fiscal prudent policies

Says it will ensure proper and effective utilisation of funds given in the Budget without compromising fiscal consolidation

Amid calls for deferring the fiscal consolidation in the next year’s Budget, the finance ministry today came out in strong defence of its fiscal policies. 

In a statement, it said that the government is committed to promoting and strengthening inclusive and sustainable development by ensuring proper and effective utilisation of funds provided in the Budget without compromising fiscal consolidation. 

As a result of sound prudent policies formulated during 2015-16, the fiscal deficit at the end of November 2015 is Rs. 4.83 lakh crore or 87% of the Budget Estimate for this fiscal.  The fiscal deficit — the gap between expenditure and revenue — for the entire current fiscal year has been pegged at Rs 5.55 lakh crore (3.9% of GDP). 

The ministry said the present fiscal situation is an improvement over the previous year’s when the fiscal deficit was then 98.9% of the Budget Estimates 2014-15. In absolute terms, there is a decrease of Rs. 41, 611 crore over November 2014 figure.

Similarly, the effective revenue deficit (revenue deficit net of grants for creation of capital assets) which is Rs.2,64,404 crore in November 2015 has shown a significant decrease of 20% at Rs 65,087 crore over November, 2014.

The government has also incurred Rs 97,788 crore on plan expenditure till November, which is 72% of Budget Estimate at Rs 1,35,257 crore. In the corresponding period of the previous year, the government had spent Rs 62,146 crore or 51 % of Budget Estimate. 

Total expenditure also increased from 60% of Budget Estimate in November, 2014 to 64% in November, 2015. 

The finance ministry has deferred fiscal consolidation path by a year by pegging fiscal deficit at 3.9% of GDP in the current financial year instead of 3.6% envisaged earlier. 

Some economists, including chief economic adviser Arvind Subramanian, advocated revisiting fiscal consolidation road map further to bolster economic growth, which has stagnated in the range of 7-7.5 %.