New Delhi: Seeking to promote investment and growth, Finance Minister P Chidambaram on Monday unveiled a five-year fiscal consolidation roadmap to contain deficit and move ahead with taxation and expenditure management reforms.
The minister also expressed the hope that the Reserve Bank would take note of fiscal consolidation initiatives while announcing half-yearly monetary policy review on Tuesday.
"As fiscal consolidation takes place and investor confidence increases, it is expected that the economy will return to the path of high investment, higher growth, lower inflation and long-term sustainability," Chidambaram said.
The government, he said, would continue efforts to restrict fiscal deficit in the current financial year at 5.3 percent of the Gross Domestic Product (GDP), lower than 5.8 percent a year ago.
Although the government had planned to bring down the fiscal deficit to 5.1 percent in 2012-13, the Vijay Kelkar- panel had said that it could go up to 6.1 percent in absence of adequate steps to check expenditure and pursue tax reforms.
The fiscal consolidation roadmap, which is based on the recommendations of the Kelkar Committee, seeks to bring down the fiscal deficit to 4.8 percent in 2013-14, reducing it gradually to 3 percent by 2016-17.
On the possibility of RBI cutting rates in its policy review tomorrow, Chidambaram said: "I am making the statement so that everybody acknowledges the steps which we are taking. And also acknowledges the government is determined to bring about fiscal consolidation. And I sincerely hope that everybody will read the statement and take note of that".
Chidambaram exuded confidence that government would be able to raise Rs 30,000 crore from disinvestment and Rs 40,000 crore from sale of spectrum.
As regards the revenue targets, Chidambaram said, "Every effort will also be made to realise the revenue budgeted under tax receipts. Government also expects to be able to contain and economise on expenditure, both on Plan and non-Plan side.
"While funds will be made available for essential expenditure, especially capital expenditure, every effort will be made to avoid parking or idling of funds."
He said the current account deficit (CAD) would be brought down to 3.7 percent of GDP in current fiscal, from 4.2 percent in 2011-12.
"If you want to finance CAD, we must attract FDI, FII and to extent necessary and desirable ECB. We think that, after looking at the factors, USD 70.3 billion (3.7 percent of GDP) will be fully financed by capital flows and substantial part will come from FDI, FII and ECB," he said.
When asked about the pending Direct Taxes Code (DTC) Bill and Goods and Services Tax (GST), Chidambaram said that work is in progress on both the tax reform initiative.
"A quick review of DTC Bill will be done. We are looking at the Bill that was introduced, at the standing committee's recommendations. We are also looking at current economic situation and therefore final version of Bill that will be introduced in Parliament will reflect all these. By and large we will have to abide by Standing Committee recommendations," he said.
He said that the slowdown in the world economy, lower growth in India, higher inflation, lower tax receipts and increased expenditures led to considerable fiscal stress in the 2011-12 financial year.
Economic growth slipped to nine-year low of 6.5 percent in 2011-12 and it is expected to fall further this fiscal.
Chidambaram said that if immediate corrective steps were not taken then the economy could go into a cycle of low growth, high inflation and high deficit.
"I reiterated our commitment to bring the economy back on the high growth trajectory. Towards this end, some difficult but crucial decisions were taken recently," he added.