'Budget should squarely focus on reducing the fiscal deficit'
Sudipto Mundle, Emeritus Professor at NIPFP tells Surabhi that the recent reforms have eased fears of a rating downgrade. Excerpts:
What are the main challenges for Budget 2013-14?
The main challenge is how to reduce the fiscal deficit. There are difficulties in revenue collection as growth has slipped.
Once growth revives, greater tax revenue too will return. The roll out of GST will also make a huge difference. In the current year, the extension of service tax coverage plus rate adjustment has had a great impact on revenue collections from this tax. Letís also see what happens regarding the DTC in the Budget.
Will the recent measures to curb gold imports help check the current account deficit (CAD)?
The CAD is the biggest worry for the economy today, according to me. It is approaching 6 per cent of GDP instead of the 2 per cent level traditionally considered safe. The spike in gold imports in the last few months is partly due to the wedding season. The import duty hike will also help moderate it. The other main contributor is crude imports.
Will the recent reforms over the past six months help ease of a rating downgrade?
Even in the present situation, neither S&P nor Moodyís have downgraded our sovereign ratings. Conditions have begun to improve
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