In a strong defence of the government’s handling of the economy, finance minister Arun Jaitley on Thursday said the NDA regime brought India back to health from the status of one of the five fragile nations even in trying conditions when the country faced two successive years of drought. It cut fiscal and current account deficits drastically, undertook structural reforms like GST and took Aadhaar and direct subsidy transfer to their logical end.
To restore health to the bad loans-encumbered public-sector banks and enable them to support growth through higher lending, the government has announced a massive Rs 2.11 lakh crore recapitalisation package for them,Jaitley told Parliament. After hitting a three-year low of 5.7% in Q1FY18, the GDP growth recovered to 6.3% in Q2. “Today, there are only some references about a possible minor fiscal slippage. During the UPA regime, there was a massive fiscal slippage of close to 6% (in FY12); current account defict (CAD) was as high as 4.8% (in FY13). In the past three years, we have reduced the fiscal deficit consistently through a glide path (it was 3.5% in FY17 and the target for FY18 is 3.2%) and CAD is brought down (to 0.7% in FY17).”
“We have shown fiscal discipline and the markets have awarded us as well,” he said. For the first time in around 14 years, Moody’s raised its sovereign rating for India by a notch in November last year.“In two of the last three years, the country witnessed drought. The global growth was going down before recovering only this year,” Jaitley said, stressing some of the challenges the economy faced in the past three-and-a-half years. The fiscal discipline is on track despite hardening of crude oil prices and higher wage awards following the 7th Pay Commission recommendations he added.
Strutural changes like the GST may have some short-term costs but in the medium and long terms, they will benefit the economy. Jaitley said the Congress had been asking for the GST rates to be lowered and now that many rates have been reasonably trimmed, the main opposition party is cribbing about a drop in the government’s indirect tax collections. “Isn’t it (the drop) natural?” he asked. The direct benefit transfers have helped target the beneficaries better and Aadhaar has been a potent instrument in this effort, he said.