oppn parties RBI Issues Timely Warning on Fiscal Consolidation

News Snippets

  • In a first, the Supreme Court recognizes marital rape, although for the limited purpose of allowing married women the right of abortion up to 24 weeks if they conceived as a result of forced sex by their husbands
  • Air India cuts discounts on base fare to students and senior citizens from 50% to 25%
  • Mallikarjun Kharge and Digvijay Singh are being touted as frontrunners to take on Shashi Tharoor in the elections for the post of Congress president
  • Sonia Gandhi will decide who will be Rajasthan CM if she feels there is a need to change guard after the near-rebellion by MLAs in the state
  • Ashok Gehlot bowed out of the race for being Congress president after meeting Sonia Gandhi
  • India has moved to the 40th spot in the innovation index, up 6 spots from last year
  • DGGI has alleged that top insurance companies, banks and NBFCs has committed a fraud of Rs 800cr by claiming input tax credit without underlying supplies
  • The Centre will borrow Rs 10000cr less than planned earlier due to good revenue collections
  • At $23.9bn, India's current account deficit widened to 2.8% in Q1, the worst in four years
  • Stocks continue to flounder on Thursday: Sensex sheds 188 points to 56409 and Nifty 40 points to 16818
  • The 36th National Games were declared open on Thusrday by PM Modi in front of a record crowd in Motera near Ahmedabad
  • Jasprit Bumrah most likely to miss T20 World Cup due to recurrence of back injury
  • PFI's political wing, the SDPI is on EC radar and action will follow soon if discrepancies are detected
  • Ashok Gehlot to meet Sonia Gandhi today, says all issues will be sorted out soon
  • Referring to the PFI ban, most Muslim organizations ask the government to take similar action against right wings organizations like the RSS, Bajrang Dal, VHP and the like
In a landmark order, Supreme Court rules that all women, married or unmarried, are entitled to safe and legal abortion up to 24 weeks of pregnancy as per the MTP Act
oppn parties
RBI Issues Timely Warning on Fiscal Consolidation

By Sunil Garodia
First publised on 2018-02-08 12:15:38

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.
Although it was expected that the MPC of the RBI would hold rates, what was not expected was the veiled warning the apex bank chose to give to the government. The RBI was categorical in saying that if fiscal consolidation is not adhered to and even made stronger; the country is in for tough times ahead. This is a very sane and timely warning.

The government was committed to fiscal deficit of 3.2% this year. It has now said that this will be closer to 3.5%. Even this figure might increase. This is bad fiscal management. As it is, India has frequently postponed what it had set out to do in the FRBM Act. The fiscal deficit was to be pruned to 3% by 2008. Even ten years later, there is no hope of achieving that. This is mainly due to the fact that revenue deficit keeps bloating, although the NDA government has kept it in check.

In order to bring down the fiscal deficit, the government will have to run a tight ship. This does not mean it will have to lay off people or otherwise cut down on necessary expenditure. But at a conservative estimate, there is a leakage of 5 to 10 percent on account of wasteful expenditure that can be controlled. This is where the focus should be. The NDA government is working (the recent decision to make the Railway Board less top heavy was one of them) on that and the results will take time in coming. But a lot more needs to be done in this area.

The RBI is mainly worried about inflation. It has already revised the target from 4% to 5%. A one percent jump is massive, especially since there is greater jump in food inflation, something that hits citizens on a daily basis. Interest rate reduction has been put on the back burner in face of rising inflation. The government should heed the RBI warning and must not deviate from fiscal targets.