Speaking exclusively to Republic Media Network’s Editor-in-Chief Arnab Goswami on Saturday, Union Finance Minister Nirmala Sitharaman defended not raising the fiscal deficit to a higher level such as 4.5%. While acknowledging that the fiscal prudence would be breached to an extent, she mentioned that the capital expenditure had gone up in the last 6-7 months. Maintaining that expenditure was necessary for stimulating the economy, Sitharaman pointed out the negative impact of raising the fiscal deficit. She stressed that excess borrowing would have an impact on the budget as well as the consolidated fund.
“I have certainly looked at what fiscal numbers we need. It means that I have to state at a time when expenditure is high, I will do the necessity for it. And that is why the government has continued with its expenditure. When the revenue generation went through a slack period, now it has improved. I will have to use the forbearance limit and breach to an extent the fiscal prudence,” the Union Finance Minister said.
She added, “That is why my Capex between July and December has gone up. My capital expenditure has gone up between the last 6-7 months. And therefore, I am trying to prove that the expenditure from the government is non-stop. That’s what is necessary for stimulating the economy. And to that extent, I have been honest enough to say- I am using the forbearance escape clause in the FRBM Act. 3.8% is where I have reached. I am sorry. This is where I am. But I also have to keep in mind- If I breach, I also have to depend on borrowing. Borrowing will have an impact on the cost and the budget itself and on the consolidated fund. I think there is a necessity to be well within the discipline brackets.”
While presenting the Union Budget earlier in the day, Sitharaman raised the fiscal deficit projection of 2019-20 to 3.8% from the initially budgeted 3.3%. The fiscal deficit, which is the difference between the total revenue and total expenditure for 2020-21, has been pegged at 3.5%. According to Sitharaman, the government used the deviation of 0.5 percentage points as allowed by the Fiscal Responsibility and Budget Management in both 2019-20 and 2020-21.