Industry needs to push for a rational fiscal policy: Rajiv Kumar

According to Dr. Rajiv Kumar, Vice Chairman, NITI Aayog, Indian industry needs to speak out on the need for a rational fiscal policy.

According to Dr. Kumar, macro-economic policy in India needs to be counter-cyclical. He felt that while the Fiscal Responsibility and Budget Management Act did have a role to play in discouraging short-term populist measures and promoted fiscal discipline, there was also no need to be concerned about borrowing that finances long term capital expenditure.

He was of the view that certain expenditure such as those for health and education could be viewed as capital expenditure as they promote productivity gains in the long run. He felt that the focus should be more on the efficiency of public spending and performance based measures needed to be built in.

In his address, Prof. Soumitra Dutta, Professor of Management and Former Dean, S C Johnson College of Business, Cornell University highlighted that Indian government's expenditure was rising faster than its income. Over the past 40 years, India's expenditure was rising at the rate of 6.0% p.a. while it's income was rising by 4.6% p.a. He felt that there was a need to undertake deep structural reforms to correct this situation. He felt that the best way to address this imbalance was to promote rapid industrial growth in the country.

Prof. Deepak Nayyar, Emeritus Professor of Economics, Jawaharlal Nehru University, Professor of Economics, New School for Social Research, New York and former Vice Chancellor, University of Delhi stated that there was a need to downsize government to balance income and expenditure. He felt that while government would find it difficult to widen the tax base in the country, the only option open to it was to cut expenditure and the only way to do that was to downsize the government.

Mr. Kenichi Yokohama, Country Director, Asian Development Bank stated that India was facing a huge infrastructure financing gap especially in urban infrastructure and railways. He suggested that India learn from the Chinese experience and look at issuing municipal bonds. He observed that some of the southern states are unable to step up capital outlay despite higher rates of economic growth and better fiscal health. He felt that these states have more room to borrow to finance their capital outlay. In terms of the Northeast, he felt that while the fiscal health of this region has improved, there were challenges in terms of implementation.

Mr. Rakesh Mittal, President Designate, Confederation of Indian Industry observed that for India to emerge as an economic powerhouse, it needed to sustain double digit growth for a number of years and to do so, it needed fiscal consolidation. A major concern was the rising revenue deficit which needed to be reigned in. In addition, the revenue and fiscal deficit of the states needed to be brought under control.

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