Govt to meet fiscal deficit target sans heavy spending cuts: FM Arun Jaitley

He said meeting FY16’s ambitious disinvestment target of R69,500 crore is a challenge on account of the recent global crisis, which could have reduced investors’ appetite. “The metal stocks are not doing particularly well, and (these stocks) were a large part of kitty that we had planned for this year. Therefore, I don’t think it makes sense divesting at a time when prices are low,” he said. The government has managed to raise only R12,700 crore so far this year by divesting small stakes in four PSUs. As reported by FE earlier, with the latest disinvestment in IOC having been bailed out by state-owned LIC, the department of disinvestment is contemplating to halve the Coal India offer size to 5% and might shift the sale to the January-March quarter. If the stock doesn’t look up, the CIL stake sale the largest one planned for the current year might even get postponed to next fiscal.

With tax collections also likely to fall short of target, analysts have expressed doubts about the government meeting the fiscal deficit target without resorting to spending cuts. “Cutting down expenditure, which had become an Indian model, actually adversely impacted the economy. Therefore, we didn’t intend to do so,” Jaitley said at the India-Africa Forum Summit (IAFS) in New Delhi. To meet the fiscal deficit target in FY15, the government had to cut spending by a whopping R1.5 lakh crore as ambitious revenue targets were missed.

The government hoped that buoyant indirect tax collections, which grew by 36% in the first half of FY16 as against the required rate of 18.8% to achieve the full-year target, would partly offset the shortfall in direct taxes. Direct tax collections grew 8.5% in April-August as against the required rate of 16% to achieve the full-year estimate. Revenue secretary Hasmukh Adhia recently said that tax collections target of R14.5 lakh crore for FY16 could fall short by about R50,000 crore. “I had consciously kept a very modest fiscal deficit target that is the movement from 4.1% which eventually became 4% (in FY15) to 3.9% (FY16 estimate). The manner in which tax revenues and expenditure are moving, I don’t see there’s going to be any difficulty,” Jaitley said.

Expressing hope that tax collections would do well in FY16, Jaitley said the government has also initiated the process of consultation for further liberalisation of FDI rules to boost economic activity.

While trying to persuade the opposition parties to support a Bill to amend the constitution to enable imposition of an uniform goods and services tax (GST) across the country, the minister said the government would continue taking administrative measures and reforms (through the Finance Bill) that require only Lok Sabha approval to become law.