Growth or controlling fiscal deficit

The Government is in a dilemma right now. Whether to rein in the fiscal deficit at the projected levels of 3.9 % for FY 2016 and then bring it down to 3.5 % in FY 2017, or to go for increased public spending which may spur economic growth but which may also drain out Government revenues thus affecting fiscal deficit targets. Another cause of concern is the payout expected from OROP and seventh pay commission. While the Reserve Bank has advised against tinkering with fiscal deficit targets to drive growth, there is a large section of economists who are for pushing economic growth through large infra spends, even though it may mean slippage in fiscal deficit. Government has made a concerted attempt in the last few months to mop up resources through increase in excise duties on petroleum products, thus effectively denying benefits of crude price slump to the consumer. But this has been greatly offset by poor performance on the divestment front. All in all, its a tough call for FM Arun Jaitley, when he presents the Union Budget on 29th February.