Union Budget 2016: FinMin May Stick To 3.5% Fiscal Deficit For FY17

With less than 40 days left for Finance Minister Arun Jaitley to present Union Budget 2016-17, its makers are said to be veering towards More sticking to the current medium-term fiscal consolidation schedule and set a fiscal deficit target for the next year at 3.5 per cent of gross domestic product (GDP).

Prime Minister Narendra Modi is likely to meet ministry officials in the first week of February. The government faces a substantial spending burden in 2016-17, primarily due to implementation of recommendations of the 7th Pay Commission, the One Rank, One Pension (OROP) issue and maintaining capital spending levels.

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For these reasons and a less than expected GDP growth, Chief Economic Advisor Arvind Subramanian called for a re-assessment of the medium-term fiscal road map in December, in the mid-year economic review. He’d lowered the official GDP growth forecast for the current financial year to 7-7.5 per cent from the earlier 8.1-8.5 per cent. Subramanian also warned that if the government stuck to the current path for fiscal consolidation, demand would be hit. He had said real GDP growth in Union Budget 2016-17, based on an analysis of likely demand, was not likely to be significantly greater than in this year.