Fiscal deficit will be cut to 3%: FM

NEW YORK: FM P Chidambaram on Tuesday said that by next year fiscal deficit will be brought down to below 3%. This is the gap between the government's expenditure and revenues from sources other than additional borrowing.
"And we are obliged to wipe out the revenue deficit too. God willing, by 2008-09, we will," he added. Very simplistically, think of revenue deficits as a loan you take to throw feed a few hundred people at a wedding; the loan will have to be repaid, but you lose eventually because the expenditure did not create any assets.Chidambaram was speaking at an event organised by the Asia Society here in New York as part of the Incredible India@60 campaign.
"India is indeed incredible," Chidambaram said. "The Himalayas, the Ganga and the Taj Mahal can stand as sentinels of Incredible India. But my concern is how to make India more credible," he continued. To put the background into perspective, Chidambaram told the audience that "thanks to colonisation, India was a late comer to globalisation.
We're trying to make up for that." Over the last four years, he explained, India has grown at 8.4%. "This year we are growing at 9.6% and we will sustain growth in double digits for the next couple of years." Explaining the drivers of this growth, Chidambaram said it is primarily being driven by consumption. The other variable he said are investments.
"Reserve Bank of India (RBI) data shows the rate of investment in the current fiscal is 20% higher than the previous year."
Add to this the fact, he said, that both labour and capital are demonstrating increased productivity gains. And finally, he said, there are people. Unlike many countries in the west and a rapidly ageing China, India's working population is larger than the number of people who depend on them for sustenance. "It will remain that way surely until 2030 and perhaps until 2040."
"But there is much work to be done," he added. Explaining that, Chidambaram said 26% of Indians live in abject poverty. To include them in India's growth story, more reforms are needed, he said. Which is why, various models of development are being experimented with. For instance, to build roads, India has a public private partnership model; in deliver education and healthcare, while the government remains active, it is also open to the private sector.
"But in the long run, these models won't be sufficient," he said. "We need a workforce that is trained and skilled." Over next 7-8 years, Chidambaram said, government is pursuing a plan to make sure that every child in India goes to school and enrolment rates in colleges go up to the 12-15% levels. The world average is 45%, he added.