Monetary Policy: No Reason To Doubt Government Commitment On Fiscal Targets, Says RBI
Reserve Bank of India Governor Shaktikanta Das said the Reserve Bank has no doubt over government commitment to meet the fiscal deficit target this fiscal after, despite the massive tax giveaways of Rs 1.45 lakh and falling indirect tax collections.
The budget has set the fiscal deficit target at 3.3 percent of GDP for the current fiscal but the steeply falling Goods and Services Tax collections and the historic cut in corporate taxes have raised concern over the maintainability of the target. Many analysts have pegged that the government will miss the target by a wide margin of 70-80 basis points. The central bank lowered the rate by 25 basis points to 5.15 percent—the fifth time in 2019.
The government has made a statement that they will adhere to the fiscal deficit target. Therefore, we have no reason to doubt the commitment to maintain the numbers as given in the budget.Shaktikanta Das, Governor, Reserve Bank of India
He said the government has several sources of revenue to meet the fiscal target. "So whatever shortfall is expected because of corporate tax rate cuts, the government has the option of increasing or making it up from other sources," he said.
Last month, Finance Minister Nirmala Sitharaman had announced tax cuts for corporates by 10-12 percent to 25.17 percent, involving a revenue loss of Rs 1.45 lakh crore this fiscal.