Pre-Budget meet: Fundamentals are strong, economy will rebound, says PM

Economists ask Modi to restore data credibility, provide stimulus

Prime Minister Narendra Modi said on Thursday that the fundamentals of the Indian economy were strong, it had the capacity to bounce back, and the Centre was expecting an economic revival in the coming quarters.

At a pre-Budget meeting, organised by the NITI Aayog, with economists, business leaders, entrepreneurs, and sectoral experts, Modi said: “The strong absorbent capacity of the Indian economy shows the strength of basic fundamentals of the Indian economy and its capacity to bounce back.”

He added that sectors like tourism, urban development, infrastructure, and agri-based industry had great potential to take forward the economy and for employment generation, according to an official statement released after the meeting. Modi also called for focused efforts from all stakeholders to achieve the target of nearly doubling the size of the Indian economy to $5 trillion by 2024.

With the prime minister said to be taking direct charge of the upcoming 2020-21 Union Budget, economists and sector experts advised him to keep aside fiscal concerns and embark on an expanded spending programme to revive growth. The prime minister was also advised to restore the credibility of official economic data.

“There were suggestions that while it is good to have fiscal discipline, this has been a challenging period, given the extent of the economic slowdown, so the markets won’t punish any decision to go for an expansion,” a participant told Business Standard after the meeting. The person said the prime minister was asked about the ways the Centre was planning to earn revenue next fiscal year.

Another person who attended the meeting said the prime minister was apprised of the importance of credible data on the fiscal balance, and urged that the Budget should be honest about the real fiscal deficit.

Union Home Minister Amit Shah, Road Transport and Highways Minister Nitin Gadkari, and Commerce and Industry Minister Piyush Goyal, besides NITI Aayog Vice-Chairman Rajiv Kumar, Chief Executive Officer (CEO) Amitabh Kant and other senior officials of the think-tank, were in the meeting.

Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister, was present. Finance Minister Nirmala Sitharaman did not attend because she was holding pre-Budget meetings with party workers at BJP headquarters.

While the economic slowdown was not mentioned in the meeting, a participant said: “Slowdown is in the air. The entire discussion was in that context.”

While the fiscal deficit in 2018-19 stands at 3.4 per cent of GDP according to the revised estimates, it is higher — to the tune of 6 per cent — if off-Budget borrowings are taken into account. Participants said there were suggestions to deal with the slowdown in areas including agriculture, the rural sector, the auto industry, electronics, and consumer goods, as well as improvements in education and health.

The participants urged the government to focus on public investment, credit expansion, exports growth, governance in state-owned banks, and increasing consumption and job creation. “A number of people spoke about the importance of removing policy uncertainty,” a participant said.

Another person said given the time constraints, each of the 35 participants was given two minutes, and could give only two-three suggestions, with Rajiv Kumar timing them. The person said there were discussions on increasing exports, and about India benefitting more from the US-China trade war, which countries like Vietnam and Bangladesh were doing. “One of the suggestions was whether a public-private institution could be set up to discuss ways for India to benefit from the global situation,” he said. “A lot of people also spoke about a meddlesome lower-level bureaucracy which makes the life of entrepreneurs difficult. Why do we need them? Why can’t there be more self-attestation?”

Participants said Modi spoke at the end of the interaction. “He admitted there were problems. He gave an analogy. A weak person may appear healthy because there is a lot of water retention. Now that the water has gone, finally people are calling him weak. But the truth is he was always weak,” the source quoted first said.

Modi intervened twice during the discussion, once when rural employment was raised, and when the quality of primary education was mentioned.

Modi has over the past few days held multiple meetings with different stakeholders over various issues affecting the economy and to thrash out appropriate policy interventions in the upcoming Budget, even as India faces its worst slowdown in more than a decade. 

“We must all work together and start to think like a nation,” an official press statement quoted him as saying at the meeting. The PM said he was happy the two-hour open discussion had brought to the forefront the experience of people on the ground. Modi assured them that he would act on suggestions that could be implemented in the short term and also consider long-term suggestions in due course.

Among others, the meeting was attended by economist Ila Patnaik of the National Institute of Public Finance and Policy, former chief economic advisor Shankar Acharya, R Nagraj of the Indira Gandhi Institute of Development Research, KKR India CEO Sanjay Nayar, Ather Energy co-founder and CEO Tarun Mehta, MakeMyTrip CEO Deep Kalra, Dabur India chief Mohit Malhotra, Bandhan Bank MD and CEO Chandra Shekhar Ghosh and CRISIL MD and CEO Ashu Suyash.

From the experts 

• Boost spending and public investment

• Remove policy uncertainty in taxation, rules and regulations

• Boost exports and take advantage of US-China trade war

• Corruption in lower-level bureaucracy needs to be removed