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No reason to doubt govt commitment on fiscal targets: RBI

No reason to doubt govt commitment on fiscal targets: RBI

MUMBAI: Reserve Bank of India (RBI) governor Shaktikanta Das on Friday said that the central bank has no reason to doubt the government commitment to meet the fiscal deficit target this fiscal despite the massive tax giveaways of Rs 1.45 lakh and falling indirect tax collections.

The budget has set fiscal deficit target at 3.3 per cent for the current fiscal but the steeply falling GST collection and the historic cut in corporate taxes have raised concerns over the possibility of meeting the target. Many analysts are of the view that the government will miss the target by a wide margin of 70-80 basis points (bps).

Key takeaways from RBI’s policy meet: Cheaper loans & more

The Reserve Bank of India (RBI) is currently on a rate cutting spree as the central bank has reduced the repo rate — the rate at which it lends to banks — for the fifth time in a row. After this reduction of 25 basis points (bps), which overall translates into 135 bps or 1.35 percentage points this year, the repo rate now stands at 5.15 per cent.

“The government has made a statement that they will adhere to the fiscal deficit target. Therefore, we have no reason to doubt the commitment to maintain the numbers as given in the budget,” Das told reporters after announcing the fourth bi-monthly monetary policy where the central bank lowered the rate by 25 bps to 5.15 per cent — the fifth in 2019.
He said the government has several sources of revenue to meet the fiscal target. “So whatever shortfall is expected because of corporate tax rate cuts, the government has the option of increasing or making it up from other sources.”
Last month, the finance minister had announced tax cuts for corporates by 10-12 per cent to 25.17 per cent, involving a revenue loss of Rs 1.45 lakh crore this fiscal.
TimesofIndia

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