The debate continues uninterrupted. After Niti Aayog Vice-Chairman Rajiv Kumar asserted that it would not be a bad idea to provide a fiscal stimulus provided the money is used for capital expenditure and doled out, EAC-PM member Surjit Bhalla said on October 17 that the government may stick to its fiscal deficit target of 3.2 percent of GDP, and may accelerate sales of government stakes in lenders and other companies as part of an effort to recapitalize banks.
Kumar's statement of October 16 was seen in official circles as contradicting the stand of Union Finance Minister Arun Jaitley who had a day earlier in Washington stated that the government was not in favor of providing a fiscal stimulus to reverse the slowdown in the economy.
The problem is the government has already used up nearly all of its budget for the current fiscal year, and tax revenues are expected to fall far short of initial expectations. At the same time, economic growth has slowed, sparking calls for more stimulus.
Like Jaitley, Bhalla said the government had stuck to its fiscal deficit targets over the past three years and may do so this year as well.
The central bank has warned that missing the fiscal deficit target could lead to a spike in inflation, hurting macroeconomic stability.
So let's see what the government may finally do.