oppn parties RBI Issues Timely Warning on Fiscal Consolidation

News Snippets

  • Centre sanctions Rs 15000cr for Covid19 emergency response, part of it immediately and the rest over a period of four years in mission mode
  • RBI says Covid-19 has "drastically altered" the growth outlook in India
  • Third coronavirus death in the Dharavi slum in Mumbai
  • Odisha becomes the first state to extend the lockdown until April 30. Schools and colleges in the state to remain closed until June 17th
  • The Supreme Court orders all coronavirus testing, including by private labs, to be done for free, says will look into the matter of reimbursement for private players at a later date
  • Former Pakistani cricketer Shoaib Akhtar proposes an Indo-Pak ODI series to raise funds for fighting coronavirus
  • Maharashtra government says many Tablighi Jamaat members who attended the Markaz and returned have gone into hiding
  • West Bengal government identifies hotspots in Kolkata and the rest of the state, inclined to extend the lockdown in those places only
  • Prime Minister Modi holds a video conference with floor leaders of opposition parties, hints at extending the lockdown
  • UP seals hotspots and makes masks mandatory
  • Masks made compulsory in Mumbai, violators will be arrested
  • ICMR says an infected person can infect 406 people in 30 days without social distancing and lockdown
  • Stock markets make a smart recovery. Sensex up by record 2476 points on global cues
  • Schools, colleges and shopping malls likely to remain closed for a further period of one month, says empowered group of ministers
  • PM Modi tells BJP workers that India is in for a long battle against the coronavirus and there is no scope to feel tired or defeated
Total Covid-19 cases rise to 5734 on Thursday and the death toll stands at 166, says the health ministry in its daily briefing
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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. Writes for a number of publications.
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.