Economic slowdown: Govt may widen fiscal deficit target to 3.7% to increase cash for schemes

The Indian Government is reportedly planning to clamp down economic slowdown by relaxing the fiscal deficit target to enable it to spend up to an additional 500 billion rupees. 

The extra spending was estimated to widen the federal fiscal deficit for the financial year ending next March to 3.7 per cent of GDP from a budgeted target of 3.2 per cent, two government officials in direct knowledge of the matter told Reuters. 

Indian economy slowed down to a three-year low of 5.7 per cent in second quarter of current financial year. 

Finance Minister Arun Jaitley said on Wednesday that the government was looking for ways to speed it up.

The officials, who declined to be named as the measures have not been made public yet, said the economy was passing through a “transitory phase” after the government’s decision late last year to outlaw old high-value banknotes and after the launch of a nationwide goods and services tax in July, the report said.

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Demonetisation, followed by the faulty implementation of the goods and services tax created difficult situation for market to strive and thrive, the report indicated. 

Jaitley has held a series of meetings with cabinet colleagues and other government officials this week to explore ways to revive the economy.

“The government could ask parliament to give its approval to defer the fiscal consolidation path this year,” the second government official told Reuters.

With the extra money, New Delhi is looking to spend more on bank recapitalisations, rural jobs programme and rural housing.

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