Mumbai: Government's resolve to cap subsidies to control expenditure and its aim to return to budget-deficit targets are important steps toward fiscal consolidation, a top central bank official said Friday.
"Consolidation is necessary and this is something the government is very committed to," Reserve Bank of India Deputy Governor Subir Gokarn said in a speech to an industry lobby group.
The RBI has previously cited credible fiscal consolidation as a prerequisite to cutting interest rates.
Gokarn also said that the proposed Goods and Services Tax, which is likely to come into effect from April 1, 2013, will ensure a steady revenue flow for the government, limiting chances of gross fiscal slippage. The tax would also pave the way for lower interest rates in the economy, he said.
The proposed uniform tax aims to consolidate and rationalize indirect taxes across the country, scrapping an archaic system that allows states to levy different tax rates, thereby distorting prices.
First Published: Friday, March 30, 2012, 14:18