Economists today suggested that government could deviate from fiscal consolidation roadmap in 2016-17 to spur economy even as Finance Minister Arun Jaitley said India has been able to achieve high growth despite global uncertainty and volatility.
There was also discussion on the present tax and subsidy regime and need for their transformation for improving growth during the meeting, the economists suggested to Jailtey during a pre-Budget consultation meeting.
In his opening remarks, the Finance Minister said: "Indian economy is on path of recovery despite uncertainty and volatility in global economic situation".
India recorded a higher growth rate of 7.3 per cent in 2014-15 compared to 6.9 per cent growth achieved in 2013-14 and 5.1 per cent in 2012-13, despite the slowdown witnessed in the world economy, pointing toward resilience of the Indian economy, he added.
The Director of Indira Gandhi Institute of Development Research, S Mahendra Dev, said: "One is the fiscal deficit. Basically, we said that there can be some deviation but one has to adhere to fiscal deficit target in the medium term. Some deviation can be there for 2016-17."
As per the revised fiscal consolidation roadmap, the government proposes to bring down fiscal deficit from 3.9 per cent in the current fiscal to 3.5 per cent in 2016-17.
The target seems slightly challenging in the light of rise in wage expenditure on account of the 7th Pay Commission recommended, which entails an additional outgo of Rs 1.02 lakh crore a year.
Implementation of the Commission's recommendations will benefit one crore central government employees and pensioners.
Jaitley further said the government continues to adhere to the path of fiscal consolidation. He said that the Budget 2015-16 targeted fiscal deficit of 3.9 per cent of GDP, as compared to 4 per cent in 2014-15 in spite of the pressing need for enhanced public investment to boost the economic growth.
"This achievement," he said "is all the more significant as the government fully implemented its tough commitments" the recommendations of the Fourteenth Finance Commission.
The Minister said that the gross tax revenues of the Government increased by 20.8 per cent during April-November 2015-16 year-on-year, which was mainly led by a buoyant growth in indirect taxes.
During the pre-Budget meeting, there was also discussion on giving rural push as agriculture is in bad shape.
"Unless we have good monsoon, agriculture growth won't be there...We need have more manufacturing and services. Lastly, there is need for push in social sector expenditure particularly on health because health risks are much higher," he said.
J P Morgan chief economist Sajjid Chinoy said every issue was discussed and there was massive divergence among economists on some issues.
Pulapare Balakrishnan, Professor of Economics at Ashoka University, said there were discussion on fiscal deficit and deviating from the path.
Besides, Balakrishnan said there was discussion on tax and subsidy regime and how it can be transformed.
The major suggestions given during the meeting included in bringing changes in small savings rate which will in turn push the economy and to focus on increasing private and public investment.
Other suggestions included setting-up of a Fiscal Council, maintaining medium term Fiscal targets, ensuring time bound investment under Corporate Social Responsibility(CSR), measures to address or incentivise the families affected by catastrophic diseases as this brings many families from APL to BPL.
