New Delhi: The Prime Minister’s Economic Advisory Council is against the government deviating from its fiscal consolidation target, a government press release said on Friday. The government has been lauded for sticking to that target, but in an election year there are murmurs that it could choose to abandon that path.
A package is most likely for farmers to alleviate their misery. According to reports, the government is also likely to introduce the concept of Universal Basic Income in the interim Budget on February 1. The clamour for a tax cut to appease the salaried classes also refuses to die down and again, in an year when the government will try hard to come back to power, the talk around this gathers more steam.
A meeting of the Bibek Debroy-led panel was held on Friday. The six-member Council consists of eminent economists: Bibek Debroy (chairman), Ratan P Watal (member secretary), Rathin Roy (part-time member), Ashima Goyal (part-time member) and Shamika Ravi (part-time member). Economist Surjit Bhalla resigned from the Council last month.
“The PMEAC strongly feels that there should be no deviation from the fiscal consolidation target and but there must be continued emphasis on social sector intervention. Amongst the challenges that need to be addressed are reforms in the agricultural sector, the MSME sector, skill development, credit issues, digital payments and the banking sector reforms. The government and the RBI should be complimented for sound macroeconomic management, and this trend should be continued with," according to the release.
International rating agency Moody's on Friday forecast India's 2018-19 fiscal deficit at 3.4% of GDP from the budgeted 3.3%. It cautioned that a farm package could lead to further deviation from the fiscal consolidation roadmap, which aims to bring it down to 3% by 2020. According to it, the government’s sops for small enterprises and low-income households will make it harder for the Centre to achieve its fiscal consolidation target, given that new revenue-boosting measures remain absent.
The Council expects the economy to grow in the range of 7.0-7.5% in the next few years. With reforms designed to address the structural problems, growth rates can easily be enhanced by at least 1%, according to the the Council.
Amongst the issues discussed by the PMEAC were agricultural problem, investment trends (including investments by states consequent to the devolution of the 14th Finance Commission), fiscal consolidation, interest rate management and credit and financial market issues.