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NEW DELHI : India’s leading economists on Monday recommended measures, including expansion of the state capital expenditure scheme, introduction of urban employment guarantee scheme, and tax incentives to stimulate growth during a pre-budget meeting with Union finance minister Nirmala Sitharaman on Monday.

The last of the series of pre-budget 2023-24 meetings discussed ways to sustain economic growth recovery in the face of growing headwinds from the external economy, people aware of the development said.

The economists have also recommended a reduction in customs duty to help domestic industry, which is facing high cost of imports.

Some of them also suggested that the government ensure predictability in disinvestment timing to ensure private sector interest.

“Some economists were of the view that the government should expand the state capital expenditure scheme next year to stimulate private investment. Capex essentially acts as a multiplier for the economy.

Besides, the view was also that it is important to insulate the economy. Hence, self-reliance initiatives should continue," said one of the persons mentioned above on condition of anonymity.

The Union government had allocated 1 trillion as interest-free 50-year capital expenditure loans for states for 2022-23 to be spent on new or ongoing projects.

Most economists asked the government to stick to a medium-term fiscal deficit glide path. The government aims to lower the fiscal deficit to 3.5% of gross domestic product (GDP) by 2025-26.

Fiscal deficit is estimated at 6.4% of GDP in the current fiscal.

Economists were giving suggestions for the Union budget to be presented on 1 February.

The economists who attended the meeting with Sitharaman the included N. R. Bhanumurthy, vice-chancellor, Dr. BR Ambedkar School of Economics University; Ashwani Mahajan, national co-convener, Swadeshi Jagaran Manch; Poonam Gupta, director general, National Council of Applied Economic Research; Ashima Goyal of the Indira Gandhi Institute of Development Research; Aditi Nayar, chief economist, ICRA; Santanu Sengupta, chief India economist, Goldman Sachs; and Madan Sabnavis, chief economist, Bank of Baroda.

The meeting was also attended by ministers of state for finance Pankaj Chaudhary and Bhagwat Karad, finance secretary T.V. Somanathan, chief economic advisor Anantha Nageswaran, as well as other senior government officials.

S &P Global Ratings on Monday cut India’s economic growth forecast for the ongoing fiscal by 30 basis points to 7% amid slowing global growth. The rating company, however, said India would be less impacted than other countries because of resilient domestic demand, which is the main driver of economic growth.

“Asia-Pacific will be vulnerable to foreign exchange stress in 2023. High US interest rates and significant current account deficits in some countries create vulnerability. Policymakers have managed currency strains so far. However, the possibility of a currency crunch and capital flight may yet rattle one or more emerging markets in 2023," the S&P report said.

Queries sent to the ministry of finance remained unanswered till press time.

ABOUT THE AUTHOR

Dilasha Seth

" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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