With reference to A K Bhattacharya's piece, "Loosening fiscal policy is a trap" (January 20), it's nice to learn that the finance ministry has sought to end speculation over the government's fiscal consolidation plan and is going all out to implement economic reforms. That the government has capped fiscal deficit at 87 per cent of the full year's Budget estimate in the first eight months of 2015-16 - against 98.9 per cent during the same period in 2014-15 - deserves praise.
More encouraging are the reports that fiscal deficit has been contained even as the government's Plan expenditure, which roughly corresponds to capital spending, has risen. This is mainly due to falling crude oil prices globally.
While speeding up the roll-out of the direct benefits transfer scheme and raising taxes on petroleum products to shore up revenues must have come in handy for the government to continue with the planned capital expenditure, one agrees with the writer that repeated re-capitalisation of public sector banks with stressed assets could be imprudent, more so when their performance has been poor.
The fiscal deficit target of 3.9 per cent of gross domestic product (GDP) for 2015-16 seems within the government's reach. Achieving the target of 3.5 per cent of GDP for 2016-17 could be a daunting task despite the government being in a position to take some essential yet unpopular or tough decisions.
It would likely not be smooth sailing for the government if it delays by a year the implementation of the recommendations of the 7th Central Pay Commission, with a clear directive that no demand of arrears should arise from this decision.
Depending heavily on a bold privatisation plan may not be the panacea for all economic ills. There is no harm in taking the privatisation route up to a reasonable point, but it is incumbent on the government to devise and implement well-articulated action plans. The government should keep walking the talk as there is no room for loosening its fiscal policy.
S Kumar, New Delhi
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