RBI Governor Says No Reason To Doubt India Will Meet Fiscal Deficit Targets
Shaktikanta Das, governor of the Reserve Bank of India (RBI), speaks during the Bloomberg India Economic Forum in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)  

RBI Governor Says No Reason To Doubt India Will Meet Fiscal Deficit Targets

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Reserve Bank of India Governor Shaktikanta has said there is no reason to doubt the government will be able to cut India’s fiscal deficit to 3.5 percent of gross domestic product in fiscal starting April 1.

In an interview with the Press Trust of India, the RBI governor said the government has remained within the limits set by the Fiscal Responsibility and Budget Management Committee for the budget deficit.

India’s fiscal deficit settled at 3.8 percent in 2019-20 and is targeted at 3.5 percent in 2020-21, Finance Minister Nirmala Sitharaman said in her Budget 2020 speech on Feb 1. Importantly, the government has decided to invoke the ‘escape clause’ provided for in 2018 amendments to the Fiscal Responsibility and Budget Management Act.

"With regard to the fiscal management of the government, the government has remained within the recommendations FRBM committee," Das said. "So, therefore, the excess fiscal deficit has been restricted to 0.5 percentage points. The government has adhered to that and a large part of the financing of fiscal deficit next year will come from small savings."

The FRBM committee headed by NK Singh had recommended fiscal deficit to be cut to 2.8 percent in 2020-21 fiscal and to 2.5 percent by FY23.

Das said there is no reason to doubt that the fiscal deficit for the next year would be met. “There is no reason for anyone to doubt that number. The budget has been presented just about a fortnight ago. There is no reason to disbelieve that number.”

The RBI governor said the budget has proposed that certain bonds will be opened up for non-resident investment without any limit.

Also Read: Credibility Of India’s Fiscal Math Depends On Higher Tax Revenue, Divestment Boost

"Besides, an announcement has been made in budget for raising limits for corporate bonds from 9 percent to 15 percent," he said. "So, therefore, there are a lot of foreign resources which are going to come into India. Indian corporates are also accessing a lot of money from foreign sources today through ECB."

The central bank, Das said, will ensure that its borrowing programme is undertaken in a non-disruptive manner. "So, as the debt manager of the government, RBI will definitely try and ensure that the borrowing programme is undertaken in a non-disruptive manner.”

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