Fiscal deficit of 4.1% an ambitious target: Rajan

Says India has capacity to bring the deficit under control provided there is improvement in revenue collection

Reserve Bank Governor Raghuram Rajan today said 4.1% fiscal deficit goal set by the government for the current fiscal is an "ambitious target".

"4.1% is an ambitious target. The government will achieve it if it does want. It has done before. But how it achieves it is what is important," Rajan said.

During 2013-14, the fiscal deficit - the difference between the government's income and expenditure - was 4.5% of the GDP.

He said said India has capacity to bring the deficit under control provided there is improvement in revenue collection.

"India has capacity to bring its fiscal under control because we don't spend too much as fraction of GDP. Where we do a less good job is collecting revenues. So broad basing revenue collection process...Expanding the base is the way we can do it (bring fiscal deficit under control)," he said in an interview to ET Now.

On growth, the Governor said the growth prospects in the last few months have improved.

"We think that prospects for growth have improved in the last few month in the last few months. On the agriculture side, they have become more uncertain because of initial deficiency in the monsoon," Rajan said.

Exhibiting signs of revival, India's manufacturing activity, gauged by the Index of Industrial Production (IIP), had risen to 19-month high of 4.7% in May on account of improved output from mining, power and capital goods sector.

Besides improved industrial activity, retail inflation fell to a 30-month low of 7.31% in June as prices of food items, including vegetables, came down.

Wholesale Price Index (WPI) based inflation in June fell to 5.43% after rising to a 5-month high in the previous month.

The governor also said that 5.5% GDP growth target is feasible and achievable during the current fiscal.

"Our sense of 5.5% (GDP growth) is feasible. If it goes beyond that government gets some headroom on the fiscal front," he added.