Roadmap for fiscal consolidation soon: Chidambaram

The government last week raised diesel prices in a move aimed at reining-in the widening fiscal deficit and reviving investor sentiment. However, several economists do not agree with the government’s fiscal deficit projection of 5.1% and predict that it could reach 6% or more.

Finance minister P Chidambaram addressed and interacted with media-persons on Monday evening, including CNBC-TV18's Shereen Bhan, regarding the government's plan to formulate a roadmap for fiscal consolidation.

"In the last few days, the government has taken a number of decisions and wishes to inform the public the background and the processes that led to the taking of these decisions. Against the backdrop of the RBI's mid-quarter review of the monetary policy, the government wishes to explain its decisions and plans to the people at large," he explained.

Below is an edited transcript of the interview on CNBC-TV18.

Q: What can we expect in terms of measures from the government because the Reserve Bank is a lot more dovish then it was in previous policies?

A: A number of issues will be addressed in the next few days-issues with Sebi, the department of revenue and the department of disinvestment. The Planning Commission meeting on Saturday threw up some ideas which will be fleshed out.

So I am hoping that some major decisions will be taken at the Cabinet and CCEA meetings this week and next Thursday. Most of them have been indicated in my statement on August 6 and that will give you a fair picture of the decisions that could be announced over the next two weeks or so.

Q: What is your realistic estimate as far as the fiscal deficit is concerned? We know that the Kelkar Report has submitted its recommendations and the report has not been made public. We know the decision on hiking prices of diesel is not going to really make a big dent as far as oil subsidies are concerned and there is already a clamour for a rollback in LPG and you plan to increase the number if cylinders from six-to-ten. Given these factors, what is the most realistic estimate in terms of fiscal deficit?

A: There is an estimate by the Planning Commission, the government and by Dr Kelkar Committee. The Kelkar Report will be uploaded on the Web by the end of the week.

But before I put it out in the public domain, I must make a prefatory statement on the path of fiscal consolidation that is being mapped. We will be lucky if we can hold the deficit at 5.1%. There will be some slippage and the percentage will depend upon some decisions that we will take over the next few days.

Q: Are you factoring-in the revenue from the auction of spectrum?

A: The revenue from spectrum is already factored in.

Q: Are you factoring-in a higher number as far as spectrum is concerned?

A: I don't know.

Q: But will that be adequate?

A: I don't think so. I think it's too early. The auction process itself goes up to end of December or early January. My expectation is that we should get a good price and that has already been factored in. So we must look for other sources of revenue over and above of what has been factored-in.

Q: What could your other sources of revenue be?

A: We will examine the options as we go along, but we are certain of maximising revenue and we plan to curtail some expenditure.

Q: How concerned are you about the threat of sovereign downgrade?

A: I don't share the description of the downgrade looming large.

Q: But what about the threat of a downgrade over the next 18 months?

A: Eighteen months is a long time. We are not talking about 18 months. We are talking about something looming large, something immediate. I don't think it is imminent at all.