Budget 2015: Jalan endorses higher deficit to boost growth

Former Reserve Bank of India governor Bimal Jalan has said Prime Minister Narendra Modi should not shy away from loosening the deficit target to ramp up public investment.

Jalan heads a panel tasked with suggesting measures to reduce subsidy bill and create space for capital spending without compromising fiscal discipline.

His expenditure management panel last month submitted to the government an interim report that is widely expected to inform the Budget, which will be unveiled on February 28. "What I am trying to get at is that nothing should be cast in stone," he said. "Your policy should be in tune with the changing economic dynamics."

Finance Minister Arun Jaitley has vowed to stick to strict deficit targets inherited from the previous government, despite opinions expressed by several top government advisers that the economy would be better served by stimulus spending focused on relieving infrastructure bottlenecks that constrain growth.