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Reducing fiscal deficit was overriding objective of UPA government: FM

Posted on Jan 31, 11:52AM | UNI

New Delhi, Jan 30 : Union Finance Minister P Chidambaram has asserted that reduction of fiscal deficit was the overriding objective of the UPA government and promised action on both the revenue and expenditure side.

Addressing a roadshow, co-hosted by Standard Chartered Bank
in London yesterday, Mr Chidambaram said though he preferred stable tax rates, widening the tax base is a revenue-enhancing option.

On the expenditure side, while subsidies cannot be removed completely, he emphasised that they could be better administered by rolling out the direct benefit transfer scheme to the entire country by end-2013, a statement said.

He reiterated that fiscal prudence was a priority for the government, and emphasised his ongoing commitment to adhere to

the fiscal targets of 5.3 per cent and 4.8 per cent of GDP, respectively, for FY13 and FY14. His confidence in his ability to reduce the fiscal deficit stems from the fact that he did so between FY03 and FY08, when the deficit fell to 2.5 per cent of GDP from 5.7 per cent.

The other priority is to attract investment, both domestic and
foreign. Mr Chidambaram acknowledged the need for foreign investment because India was likely to run a substantial current account deficit in the near term. Also, he emphasised the need to revive the investment cycle to achieve 8 per cent GDP growth by Fiscal year 2015.

He said India probably represented one of the best investment
opportunities among developing markets in almost all sectors of
its economy and believed that the country's potential growth was 8
per cent and above and that it could not afford to have less than
seven per cent growth growth because as it would adversely affect the aspirations of the young.

However, he did not like comparing India with China because

they had different growth dynamics.

Mr Chidambaram indicated that the GDP growth for the


fiscal would be around 5.7 per cent. This was close to 5.5 per

cent projected by the Reserve Bank of India in its third quarter policy review yesterday.

He, however, expected a gradual recovery of the economy and
forecast a GDP growth of 6 to 7 per cent for next fiscal and targeting a 8 per cent growth from fiscal 2015 onwards.

He said striking the right balance between growth and inflation remains a policy challenge. While high inflation hurts the poor, low growth is equally harmful. He was pleased that the RBI reduced the repo rate by 0.25 per cent yesterday and said the purported rivalry between the RBI and the Finance Ministry is a media creation.