But Moody’s Investor Service clearly saw merit in the government’s attempts and gave it a rare rating upgrade. India also benefited from global crude prices that year.
In July 2014, Jaitley said that the Narendra Modi-led government would retain the fiscal deficit target for 2014-15 at 4.1 percent of the GDP and reduce it further to 3 per cent by 2016-17. This was a Herculean task as the fiscal deficit had touched a high of 5.7 percent in 2011-12.
While the deficit was brought down to 4.5 percent in 2013-14, it still remained higher than the set target. “My predecessor (P. Chidambaram) had set up a very difficult task of reducing the fiscal deficit to 4.1 percent of GDP in the current year. The target is indeed daunting. Difficult as it may appear, I have decided to accept this target as a challenge,” Jaitley had said. He succeeded.
In 2015-16 Budget speech, Arun Jaitley had to admit that the target of 3 percent would be achieved in 3 years instead of 2, as targeted by the FRBM Act. He also said that as per the new road-map, fiscal deficit would be 3.9 percent of GDP in 2015-16, 3.5 per cent in 2016-17 and 3 per cent by 2017-18. Jaitley, once again, kept his word.
In 2016-17, he recommended setting up of a committee to review the FRBM Act, to better understand whether a range of numbers is better than a set of fixed numbers, thus giving the government some flexibility to maneuver under difficult market conditions.
In May 2016 a committee under former revenue secretary NK Singh was set up which recommended that the government should target a fiscal deficit of 3 percent of the GDP in the years up to March 31, 2020 cut it to 2.8 per cent in 2020-21 and to 2.5 per cent by 2023.
Arun Jaitley set the fiscal deficit at 3.2% during the 2017-18 Budget, and also promised to bring it down to 3% in 2018-19. While he had to revise the deficit target for the year ending in March 2018 to 3.5%, the government did manage to keep it to 3.53%.
“Our government assumed office in May, 2014 when fiscal deficit was running at very high levels. Fiscal deficit for 2013-14 was 4.4% of GDP. The Prime Minister and the government have always attached utmost priority to prudent fiscal management and controlling fiscal deficit. As Hon’ble members would recall, we embarked on the path of consistent fiscal reduction and consolidation in 2014. Fiscal deficit was brought down to 4.1% in 2014-15 to 3.9% in 2015-16, and to 3.5% in 2016-17. Revised fiscal deficit estimates for 2017-18 are Rs 5.95 lakh crore at 3.5% of GDP,” Jaitley said, pleased with the government’s attempts.
It now remains to be seen the fiscal deficit that the new Finance Minister, Nirmala Sitharaman, sets, and subsequently achieves.