India's Finance Minister Arun Jaitley said that he was not worried about the fiscal deficit and that the government would be able to meet its target despite additional outgo towards the implementation of the 7th Pay Commission. He, however, admitted that the impact of implementing the pay commission's recommendations, which would result in an additional annual burden of £10.2 billion on exchequer, would last for two to three years.
“I am not particularly worried about the fiscal deficit target,” he said while replying to questions on the impact of the recommendations on public finances at an event in Delhi. He further said that besides achieving the target, the government has also been able to improve the quality of fiscal deficit. The government proposes to bring down the fiscal deficit to 3.9 per cent of GDP in 2015-16, 3.5 per cent in 2016-17 and 3 per cent by 2017-18. “If you achieve a fiscal deficit by either cutting down expenditure or withholding tax returns, then you may strictly have statistical figure, but the quality of the fiscal deficit will always be suspected...we have concentrated on the quality of the fiscal deficit and we will probably be able to maintain it,” he added.
However, “...as the base of the GDP increases, by the third or the fourth year, the spikes come down and (thereafter) you reasonably reach that 2.5 per cent figure back... These pressures will be for the next 2-3 years,” the minister said.