Government confident of meeting fiscal targets

Senior policymakers, including Minister of State for Finance Jayant Sinha and Economic Affairs Secretary Shaktikanta Das, on Friday said the government would stick to its medium-term fiscal targets, notwithstanding the additional expenditure burden of the Seventh Pay Commission's recommendations.

The pay commission report presented on Thursday had recommended an increase in the remuneration of about 10 million government employees and pensioners. This was estimated to impose an additional burden of Rs 1,02,000 crore in 2016-17. Of this, close to Rs 74,000 crore was expected to be the impact on the 2016-17 Budget, with the rest impacting the year's rail budget.

Minister of State for Finance Sinha said: "We are confident that we will be able to stick to the fiscal consolidation road map even with what the Pay Commission has recommended. We had put together a road map after taking into account the impact of the pay commission."

He also ruled out any expenditure cuts in the forthcoming Budget to meet the Rs 1.02-lakh-crore stress on government finances once the recommendations were implemented. The government had unveiled a fiscal consolidation road map in Budget through which the fiscal deficit was to be brought down to 3.9 per cent of GDP in 2015-16, 3.5 per cent in 2016-17 and three per cent by 2017-18. The fiscal deficit in 2014-15 was four per cent of GDP.

Asked if this would require a cut in expenditure or tax measure to bolster revenue, Sinha said: "No. We are confident that we will continue to follow the fiscal policies that we are following right now while at the same time being able to adhere to the fiscal consolidation road map."

Expressing confidence that the fiscal deficit target would be met, Das said the commission's report was expected and the government knew it would take effect from January 1, 2016. "So this was something which was expected. Now, the government was obviously not aware of the content of the report. But the government always had a broad estimation of what was going to be the impact of a new pay commission's recommendation and accordingly internally a kind of risk matrix was prepared," he told TV channels.

Most of the expenditure because of implementation of the report would come in 2016-17, he added. "So, the government will deal with the situation. We will work out our numbers. So far as fiscal consolidation road map was concerned, that will be maintained."

The recommendations would lead to an additional outgo of Rs 73,650 crore from the Budget and Rs 28,450 crore from the railway budget.