Chief Economic Adviser Arvind Subramanian on Tuesday termed the Fiscal Responsibility and Budget Management (FRBM) committee’s roadmap for fiscal deficit as ‘obsolete’, saying any move towards fiscal consolidation needs to be in tune with present realities.
“The conditions were quite different when the (FRBM) report came out,” he said in an interview on Tuesday, a day after Finance Minister Arun Jaitley tabled the Economic Survey in Parliament.
According to Subramanian, who authored the Survey, fiscal targets for the next year have to be realistic, without ignoring political reality of an election year. He, however, ruled out any ‘fiscal populism’ due to the elections.
The Chief Economic Adviser (CEA) noted that India’s fiscal policy demands reduction in both deficit and debt. “India’s fiscal policy demands steady reductions in both the debt and deficit... that could be what the government should aim for,” he said, adding that the government is serious about fiscal consolidation for its own sake and not because of rating agencies.
His comments come in the backdrop of various experts expressing concern that there may be some slippage in fiscal target for this year, given the less-than-expected GST collections and high borrowing. “I would argue for an ambitious fiscal consolidation on economic grounds because inflation is higher, output is higher, output gaps are closing, and there is more volatility and external uncertainty,” he noted.
Subramanian conceded that he was wrong about oil price projections, saying he was surprised that prices have gone above $60 a barrel. “I will admit completely that I had certainly thought that it should be very difficult for oil to go beyond and stay beyond $55-60 per barrel. It surprised me, it surprised many market participants.”
On judicial reforms
“We were told that we stay clear of judiciary, but we have gone into those areas. How much more radical do you want us to be?” asked the CEA