New Delhi: The 14th Finance Commission on Tuesday suggested a fiscal deficit target of 3.6 percent of GDP in 2015-16 and 3 percent in the subsequent years on the back of likely pick-up in economic growth.
Finance Minister Arun Jaitley, who is scheduled to present Budget on Saturday, in the Action Taken Report said "the Commission has made recommendations that deal with issues including GST, fiscal environment and fiscal consolidation road map... These recommendations will be examined in due course in consultation with various stakeholders".
The fiscal deficit for the current financial year was pegged at 4.1 percent of the GDP and government has repeatedly said that it would stick to the target.
The revised estimates of fiscal deficit will be unveiled by the Finance Minister in the Budget.
The Commission in its report tabled in Parliament has suggested the Centre to restrict the fiscal deficit in 2015-16 at 3.6 percent of GDP.
"For the Union Government, the ceiling on fiscal deficit will be 3 percent of GDP from the year 2016-17 onwards up to the end of our award period," the Commission's report tabled in Parliament said.
The Commission, headed by former RBI Governor Y V Reddy, further said: "We expect that an improvement in the macroeconomic conditions and revival of growth as well as tax reforms should enhance the total tax revenues of the Union Government, enabling it to eliminate the revenue deficit completely much earlier than 2019-20."
Referring to states, it said fiscal deficit of all them will be anchored to an annual limit of 3 percent of Gross State Domestic Product (GSDP).
The States will be eligible for flexibility of 0.25 percent over and above this for any given year for which the borrowing limits are to be fixed if their debt-GSDP ratio is less than or equal to 25 per cent in the preceding year.
The recommendations of the Finance Commission helps Centre to devolve central taxes amongs states.
