Budget 2014: Rangarajan says achieving 4.1% fiscal deficit tall order

Finance Minister P Chidambaram today presented the interim budget for 2013-14, in which he managed to contain the fiscal deficit for the current financial year at 4.6 percent, much lower than the targeted 4.8 percent. The current account deficit for the year has also come in at a much better $45 billion, sharply lower than last year’s $88 billion.

However, for the next financial year the finance minister has pegged the fiscal deficit at 4.1 percent, which is in line with fiscal consolidation road map.

C. Rangarajn, chairman of the Prime Minister’s Economic Advisory Council, is of the view that since the interim budget and forecasts are based on assumptions, there will be more expenditures on certain accounts and one cannot rule out additional tax measures in the coming year to boost revenues.

“A clear cut programme for raising revenues and cutting on subsidies as a proportion of GDP will become imperative,” he said.

Rangarajan stressed that subsidies as a proportion of GDP should come down, saying that though the original intention was for subsidies to be 1.6 percent of GDP, they are currently about 2 percent. He said this can only happen if total amount of  subsidies are regulated. His solution is that within the total quantum of subsidies, whatever is paramount should be provided for, with cuts being made elsewhere.