The government said that going forward, India must meet its near-term fiscal deficit target of 3% of GDP. Also, expenditure control and expenditure switching from consumption to investment will be the key.
The Economic Survey tabled in the Parliament on Friday said that economy is likely to over-perform on Reserve Bank of India's (RBI) inflation target which will open up the case further for monetary policy easing by the central bank.
The government said that inflation has surprised market participants, policymakers and the RBI alike and said that downward shift in inflation is going to continue on the back of fall in crude oil prices and agricultural produce in India.
Although the Survey said that crude prices are expected to remain low in the coming months but unpredictable geopolitical developments might reverse the trend. It said, " However, the persistence of moderated oil prices seems highly probable for at least three reasons: weaker global demand, increased supplies, and the global monetary and liquidity environment."
The Survey said, "India can balance the short-term imperative of boosting public investment to revitalize growth with the need to maintain fiscal discipline. Expenditure control and expenditure switching, from consumption to investment, both in the upcoming budget and in the medium term will be key."
The Survey said that India will adhere to 4.1% fiscal deficit target for the current fiscal despite lower revenue collection and delayed disinvestments, reduced subsidies due to falling oil prices and "expenditure compression" will ensure commitment to discipline.
The government said that going forward, India must meet its near-term fiscal deficit target of 3% of GDP. Also, expenditure control and expenditure switching from consumption to investment will be the key.
The government said that fiscal consolidation must continue. "However, the need for accelerated fiscal consolidation has lessened because macroeconomic pressures have significantly abated with the dramatic decline in inflation and turnaround in the current account deficit," the Survey said.
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