The finance minister had two broad objectives — accelerating economic growth and checking the fiscal deficit. In many ways, he has achieved the goals. His decision to target the fiscal deficit at 5.1 per cent in 2012-13, compared with 5.9 per cent this financial year, shows that. If this reduction of 0.8 percentage points in a year persists, we could target a fiscal deficit at 3 per cent of the gross domestic product in the next two to three years. He aims to contain subsidies at under 2 per cent in 2012-13 and 1.75 per cent over the next three years. Raising the limit for external commercial borrowings (ECBs) would boost capital inflows.
It would also prevent the rupee’s depreciation and help achieve the current account deficit (CAD) target. I would say it is a step in the right direction. If we can achieve the CAD target of 2.5 per cent of GDP, we can go easy on ECBs. The fiscal deficit target of 5.1 per cent of GDP is realistic. The move to bring excise duty and service tax on a par is also good. However, these have not yet been brought to pre-crisis levels. The disinvestment target of Rs 30,000 crore is a modest one. This year, we could achieve just Rs 14,000 crore. But for 2012-13, the finance minister seems focussed, and I feel the disinvestment would exceed the target.
C Rangarajan
Chairman,
Prime Minister’s Economic Advisory Council