Govt committed to keep fiscal deficit within budgetary target, says Jaitley

Modi govt takes steps to check current account deficit and rein in rupee

The government has chose to withdraw withholding tax on Masala bonds, allow some breathing space to foreign portfolio investments, and check non-essential imports and promote exports in order to arrest the decline in rupee and check the widening current account deficit. It also chose to curb non-essential imports and increase exports.

"We are optimistic about our growth rate and tax collection".

A day after announcing a set of measures to boost short-term capital inflows into the country to rein in rupee depreciation and curb rising current account deficit (CAD), finance minister Arun Jaitley on Saturday sent a strong signal of fiscal prudence by committing to the fiscal deficit as well as capital expenditure targets.

The capital expenditure targets will also be met, he added. He also said the government will maintain the 100% capital expenditure for the year without any cut. The fiscal deficit is the gap between revenues and spending and is a key measure of the state of public finances.

The Government not only assured on the fiscal deficit but also claimed that growth will be much better. However, the position was a bit better than past year, when 92.4 per cent of the target was hit this time around.

At Saturday's meeting detailed presentations were made by Departments of Economic Affairs, Revenue, Expenditure and Disinvestment. "We are now seeing the impact of demonetisation on direct taxes", said M.S. Mani, partner, Deloitte India.

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The government had projected a GDP growth rate of 7.2-7.5% in the Budget 2018-19.

A 71% increase in income tax return filers before the 31 August deadline this year of 5.42 crore compared to the number of filers in the same time a year ago hints at improved direct tax compliance.

Jaitley said there was a phenomenal increase in the assessee base.

He added that CBDT was "very clear" that this year the government would be able to collect taxes in excess of the budgeted target. India's current account deficit jumped to 2.4 per cent of Gross Domestic Product in the first quarter of 2018-19, from 1.9 per cent in March 2018.

"The government is confident and will strictly maintain the 3.3 per cent fiscal deficit target", Jaitley told reporters after the over three-hour long meeting.

There were expectations that the government may cut excise duty on the two fuels to ease burden on the consumers but it seems it didn't want to take chance as it stands to lose Rs 14,000 crore in revenue from a Re 1 per litre cut in excise. The government, in a meeting chaired by Prime Minister Narendra Modi, also chose to remove restrictions on external commercial borrowings, masala bonds to control the current account deficit, which slipped for the first time in six quarters in April-June.

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