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11/12/2013 06:51pm

Govt budget not to go haywire, focus to stay on fiscal discipline: Chidambaram

image Govt budget not to go haywire, focus to stay on fiscal discipline: Chidambaram
New Delhi, Dec 11 (KNN) In the wake of concerns that the UPA government may return to more populist schemes after reverses for the Congress Party, Finance Minister P Chidambaram said the government will stick to the fiscal prudence.

"The agenda (is) obvious.  At the top of the list is fiscal consolidation. There can be no compromise -- and I speak for the government -- there will be no compromise on the decision to walk on the path of fiscal prudence and contain the fiscal deficit step by step, year by year, until we reach the goal of 3 per cent of GDP in 2016-17," he said while inaugurating the Delhi Economic Conclave 2013 on 'The Agenda for the Next Five Years’.

Referring to the causes for high inflation he said that the argument that inflation must be controlled by supressing farm gate prices and rural wages…is a spacious argument to supress the needs of the poor and deserves to be rejected.

"Government of the day will have to pay the price for the current rate of high inflation," he said.

The government will stick to the path of fiscal consolidation and endeavour to narrow the deficit to 3 per cent of gross domestic product by 2016-17, Chidambaram added.

The government has set a fiscal deficit target of 4.8 per cent of GDP for the current financial year.

Borrowing should largely finance investment and not consumption, he said, adding that India would also need to focus on the revenue deficit.

"India cannot finance a CAD of the order of USD 88 billion as we did in 2012-13. Nor can we allow import of gold of USD 50 billion or more.  Nor should India import coal when it has coal in abundance, nor should India tie itself in policy knots and be forced to import commodities which they have the capacity to produce and manufacture."

Chidambaram said that the red line of 4.8 per cent of GDP for the fiscal deficit will not be crossed.

He also said that the political logjam may affect game changer legislative measures such as Direct Tax Code, Goods and Services Tax and increasing foreign direct investment limit in the insurance sector.

Also present at the event were Chairman of the Chief Economic Advisory Council to the PM, C Rangarajan, RBI Governor Raghuram Rajan, Montek Singh Alhuwalia; Economic Affairs Secretary Arvind Mayaram, among others. (KNN/SD)
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