India unveiled Monday a five-year fiscal consolidation road map ahead of the Reserve Bank of India’s monetary policy review, aimed at cutting the budget deficit to 3% of the economy by 2017 in an attempt to put the country’s finances in order.
Palaniappan Chidambaram, India’s finance minister who drove recent economic reforms, admitted the fiscal deficit for 2012-13 fiscal year would exceed the projected 5.1% of gross domestic product but said the goal was to bring it down to 3% by 2017, reports The Economic Times.
“We think that we have a do-able fiscal consolidation plan,” Mr. Chidambaram told the Financial Times. “We will do all that is required to be done to achieve the plan… There is no option.”
The fiscal plan maps the budget deficit falling steadily to 4.8% of GDP next year, 4.2% in 2014-15, 3.6% in 2015-16 and 3% in 2016-17, though it still lacks clear cut steps on how to achieve the targets.
The plan was also seen as a nudge to the central bank to cut interest rates at its policy meeting Tuesday, reports the Wall Street Journal. The RBI is expected to hold interest rates, saying it needs to “remain cautious for some more time” despite the slowing economy as inflation risks are high.
Economists and government officials are cynical of the plan, saying that this year’s deficit is already heading towards 6%, coupled with a grim growth outlook as low as 5.0% dogged by high interest rates, slow economic reforms and global economic uncertainties.