Meeting fiscal deficit target of 3.5% will be a challenge: Government

NEW DELHI: The government said meeting the fiscal deficit target of 3.5% of GDP for the current fiscal will be a challenge because of the additional burden due to the pay commission award even as it reiterated its commitment to cutting fiscal deficit to 3% of GDP by FY18.

The Indian economy is showing “bright” near-term prospects, the government said in the mediumterm Expenditure Framework Statement for 2016-2017 presented in Parliament on Friday by finance minister Arun Jaitley.

The statement pointed to improved macroeconomic stability because of fiscal prudence and lower inflation helped by moderation in crude prices. It said major subsidies are expected to decline gradually from 1.5% of GDP in FY17 to 1.4% in FY18 and further to 1.3% in FY19. The fiscal deficit target for FY18 and FY19 remain unchanged at 3% of GDP.

“In light of the encouraging performance of the economy during the previous financial year, marked by pickup in economic growth, lower inflation, buoyant tax revenues, increasing foreign direct investment flows and the government's push to reforms in crucial areas including banking, infrastructure, power, taxation, the near-term prospects for the economy look bright,” the statement said.