Arun Jaitley Should Stick to Fiscal Roadmap in Budget: Arvind Virmani

There's much debate whether Finance Minister Arun Jaitley should focus on meeting the government's fiscal deficit roadmap or loosen the purse strings to kick start the domestic economy in the upcoming Budget.

Arvind Virmani, a former economic adviser to the union government, expects Mr Jaitley to focus on the 4.1 per cent fiscal deficit target set for the current financial year. (Watch Interview)

Rather than changing the fiscal deficit target, the composition of expenditure should be changed to stimulate the economy, he said. "The revenue deficit ratio should be reduced and secondly the investment consumption should be increased. I still expect that to happen in this Budget," said Mr Virmani.

A closer look at the government's spending over the last three years indicates the government on average spent around 6.4 per cent of its total budgeted spending towards planned capital expenditure, which is intended to boost infrastructure growth in the country.

In 2014-15, the government has earmarked Rs 1.21 lakh crore towards planned capital expenditure, which is 6.8 per cent of the overall Rs 18 lakh crore Budget outlay.

Mr Virmani also pitched for diversion of spending from subsidies to planned capital expenditure to boost growth. This will address supply side constraints in the economy, he said.

Mr Jaitley has previously said that he is in favour of subsidy rationalization. However, he has also said that elimination of subsidies in India, where one-third of the people are still living in poverty conditions, is neither possible nor desirable.