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| FM: On the right path |
The most widely used words in the UPA government regime are fiscal consolidation and inclusive growth. Thanks to the windfall gains from the 3G/BWA spectrum sale, the government seems to be well on course on its path of fiscal consolidation in this fiscal year. Gross fiscal deficit as a percentage of GDP is estimated to be 4.8% as compared to 6.3% in the last fiscal. Needless to say, a major chunk of the drop in fiscal deficit comes from the gains from the 3G/BWA spectrum sale. Revenue deficit is also estimated to be 3.5 % as a percentage of GDP as compared to 5.1% the year earlier. (source: economic survey 2010-2011)
The thirteenth finance commission headed by Mr.Vijay Kelkar has laid down a fiscal roadmap requiring the states to do away with revenue deficit and achieve a fiscal deficit target of 3 % of their respective GDPs by 2014-2015. Such steps by the states need to be taken in a very calculated and systematic manner in order to meet the desired targets within the stipulated time frame. If Indian economy does achieve the target of fiscal consolidation laid out by the Kelkar headed commission, it would become a very attractive investment destination not only for the FIIs but also for the domestic investors. A lot of FDI will flow to the Indian markets if such targets are met. 
To achieve the target of fiscal consolidation, it is imperative to reform the current fertilizer and petroleum policy as a major chunk of public non-plan finances are diverted here. The output from such subsidies is very low as compared to the same amount being invested elsewhere on other developmental projects. But above all, the governments need to be bold enough to understand as well as implement the recommendations of the committees it sets up.
-Sunny Gusain
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