Budget 2016: Received sharply divided opinion on fiscal consolidation, says Jaitley

Says budget can't be based on populism, but on sound policies

Without spilling the beans on the government's strategy on the contentious fiscal consolidation road map, finance minister Arun Jaitley today said the Budget cannot go in for populism and the Indian economy has to be placed on sound policies. He also said a consensus is better than division in case of taxation matters such as Goods and Services Tax (GST).

"You will have to wait a couple of weeks to know the answer. Indian economy has to be put on sound basis," Jaitley said in an interaction at an event here. 

He said for the first time, he came across all shades of opinion on fiscal consolidation road map. 

While, industry wants more spending, economists are sharply divided. Then, he said there is a third opinion on why to tie to any fiscal deficit target in a dynamic situation. 

He said the target of fiscal deficit depends on the growth projection and revenue buoyancy. 

Yesterday, RBI governor Raghuram Rajan advised the government not to defer the fiscal consolidation road map. On the other hand, an overwhelming majority of economists polled by Reuters wanted Jaitley to postpone the road map for one more year. 

The government has already deferred a fiscal consolidation road map for one year. The ultimate target of reining in the deficit at 3% of GDP was to be originally met next year. But, it was deferred to 2017-18. For the next year, the target was relaxed to 3.5%. 

For the current financial year, the target was adjusted to 3.9% of GDP or Rs 5.5 lakh crore against the original target of 3.6%. As much as 88% of that target was met by December this year. 

On GST, Jaitley said author of the Bill-- the Congress-- had suddenly come out with three reservations. He said discussions are better to sort them out than voting a flawed law for the future generation. 

Jaitley also said a couple of taxation cases remain to be solved and those too will be settled. Both Vodafone and Cairn have dragged the government into arbitration. 

Responding to a different interpretation on Prime Minister's statement yesterday on incentives to corporate, the finance minister said subsidies are to be targeted better. There is no contradiction between giving incentives to agriculture or industry, depending on the situation, he said. 

He said,"We are in favour of rationalization of subsidies & not abolition of them".