Follow fiscal glide path, says Jaitley after Moody's upgrade

Sees upgrade as a 'belated recognition' of the positive steps taken by the Central govt in past 3 years

A day after dithering on the fiscal glide path, Finance Minister Arun Jaitley on Friday said the government will maintain fiscal discipline and adhere to the roadmap suggested by a government-constituted panel. Jaitley’s remark follows an upgrade in India’s sovereign ratings by Moody’s Investor Services.

"Track record for past three years speaks for itself. We intend to move (ahead) on fiscal track. We should also keep in mind that the ratings welcomed collateral consequences of government's actions," Jaitley told a press conference after Moody's announced its decision.  

On Thursday, Jaitley was in Singapore, where he said: “No pause but challenges arising from structural reforms (which) could change the glide path.” 

The Centre’s fiscal deficit target for 2017-18 is 3.2 per cent of GDP. According to the recommendations of the Fiscal Responsibility and Budget Management (FRBM) panel, the Centre should aim for a fiscal deficit of 2.5 per cent by FY23. Meanwhile, the panel has suggested a fiscal deficit target of 3 per cent for FY19. The recommendations are yet to be accepted by the government.

Jaitley said many who had doubts about India's reform process would now seriously introspect on their position.

"We welcome Moody's rating upgrade of India after thirteen years. It is belated recognition of the positive steps taken in past few years," he said.

Reforms in past three to four years have placed India on a fast-paced growth trajectory, he said. 

Backing reforms brought in by the Narendra Modi-led government, Jaitley said that the upgrade reflects recognition of the reform measures undertaken by the Centre.

"We believe that it is a belated recognition of all the positive steps taken in India in the past few years that have contributed to the strengthening of India's economy. Obviously, it is recognition and endorsement of the reform process in India in past three-four years," he said.

Regarding demonetisation, he said that the decision was now taking India towards formalisation and digitalisation of economy. 

Besides demonetisation, he attributed Moody's steps to the government's decisions on Aadhaar, insolvency, recapitlisation of public sector banks (PSBs), setting up of the monetary policy committee (MPC), and most importantly, the introduction of the goods and services tax (GST). 

He said all these measures were not happening in isolation. 

"If you look at big picture for the past three years, India has been the fastest-growing major economy and one of the few economies taking structural reforms," he said. 

On future road map, the finance minister said there will be greater emphasis on implementation. 

 He also spoke about the benefits of growth process, while adding that a lot of expenditure is being incurred in rural areas.

He, however, refused to link the ratings upgrade to upcoming elections.