The Union Budget should provide a clear roadmap to contain fiscal deficit in the coming years and the policy makers should take some decisions on petroleum subsidies, Chairman of the Economic Advisory Council to the Prime Minister C Rangarajan said here today.
"The current year, the fiscal deficit is not going to be contained at the budgeted level of 4.6 per cent of the GDP. It will exceed that. But I think in order to maintain the credibility we should try to ensure that the excess over the budgeted levels is as limited as possible," Rangarajan said.
He was delivering the Second Foundation Day Lecture at the ICFAI Foundation for Higher Education.
"But I think the budget should also give clear indication of roadmap to bring down the fiscal deficit in the coming years. This will require acting on subsidies. Some policy decision will have to be taken with respect to petroleum subsidies and I think we should do that," he added.
Reacting to similar suggestions, Petroleum and Natural Gas minister S Jaipal Reddy on Wednesday had said practical and political compulsions are deterring the government from freeing diesel pricing from its control.
The RBI had also in its third quarter review of the monetary policy suggested the government deregulate diesel to check mounting trade deficit and increasing dieselisation of the economy.
Replying to query on the rate cuts by the RBI in future, Rangarajan said, the central bank may take a decision once the non-food manufacturing inflation comes down.
"It (rate cut) all depends on how the inflation behaves in the coming months. The reduction in the policy rate will come about only when the there are definite signs of decline in the non-food manufacturing inflation," the Economic Advisory Council chief said.
He said pressure on the rupee against dollar may ease as the capital inflows into the country starts increasing.
Rangarajan said there has been a resumption of capital flows in the first quarter of the current calendar year though for this fiscal as a whole there may be a marginal decline in reserves.
