Employ measures to revitalize India’s growth story, urge economists

India’s prominent economists have urged the Union Finance Minister Pranab Mukherjee to expedite reform measures, control fiscal deficit and employ policies to restore a sense of confidence among both domestic and international investors in India’s sustainable growth story. Mukherjee, who addressed the leading economists who attended the pre-Budget meeting convened by the Finance Minister to solicit their suggestions on various vital economic issues, said that by the end of March, the head on inflation would be between 6-7% while the growth rate may be around 7% plus.

At a time when sentiments towards India, domestically as well as globally, has not been very optimistic owing to a series of unwarranted developments while the economic indicators too for a large part of this fiscal indicated that the growth momentum is fizzling out, the leading economists who participated in the discussion urged government to use this year’s Budget as an instrument for restoring the confidence by making it a Policy Budget rather than only a statement of account.

The economists suggested that government must show its intent to reduce the fiscal deficit and the message of fiscal consolidation should also be sent through the Budget. In the last Budget, the government had projected the fiscal deficit to fall to 4.6% of the GDP in 2011-12 as against 4.7% in the earlier fiscal. They suggested that expenditure on populist measures be reduced and the leakages of funds in implementing them be curbed. In this regard they suggested decontrol of diesel, higher excise duty on diesel cars and use of cash transfer system to distribute subsidies directly to the beneficiaries among others.

In order to revive the slowing economic activities in the country, certain participants suggested that mega projects, which are held up for long may be cleared especially relating to power, mining and steel etc. to send a positive signal to the corporate world. APMC Act may be amended and perishable commodities such as fruits and vegetables be taken out of its purview. While many experts advocated high expenditure on health and education sector, some suggested for organized retail which would help in containing the prices of food items especially and also giving infrastructure status to aviation sector and township housing among others.

The government is slated to implement ambitious reforms on both direct and indirect taxes fronts. Bills on Direct Taxes Code (DTC) and Goods and Services Tax (GST) are currently with Parliamentary Standing Committee. Economist also asked Mukherjee to speed up policy reform process and implement its decision to allow foreign investors in the multi-brand retail sector.

Some members suggested extension of section 80(i) of Income Tax Act for at least another three years for attracting investment in infrastructure sector while they were also  in favor of abolishing Security Transaction Tax, reforms in tax administration system, better Tax-GDP ratio, budgetary incentives to tackle environmental problems, ensuring availability of updated information and data for better policy decisions and focus on core development issues for people of north-east regions among others.