The finance minister has broadly delivered on fiscal targets for 2014-15, while loosening the fiscal belt a little. FM might have struck an acceptable compromise for facing the twin challenges of pursuing fiscal consolidation and stimulating public investment. Against heavy odds, in the Budget for 2014-15, Jaitley had left the targets of fiscal and revenue deficits bequeathed by his predecessor unchanged. The revised estimates for 2014-15 indicate that he is likely to meet both. This, in spite of a shortfall in gross tax revenue of 0.8 per cent of GDP, is good for starters of his credibility. For 2015-16, he has lowered the target for gross revenues from 11.2 per cent of GDP in the Medium-term Fiscal Policy Statement (MTFPS) to 10.3 per cent. He has combined this conservatism with a relaxation of the fiscal and revenue deficit targets of MTFPS by 0.3-0.8 per cent of GDP. As a result, the elimination of the revenue deficit altogether and of containing the fiscal deficit below 3 per cent of GDP will take longer. The defence of this slippage from the rolling targets may lie in the need to manage a smooth transition from a non-targeted to a targeted system of subsidies, to give a boost to public investment in infrastructure, and to accommodate the award of the 14th Finance Commission.
Former chief economic advisor