EAC-PM member demands white paper on medium-term fiscal framework

Sounding a note of caution, EAC-PM member Rathin Roy on Monday urged the government to issue a white paper on medium-term fiscal framework, arguing that it would be difficult to meet the Budgetary tax collection target for 2019-20.

Roy, while speaking at an event here, also expressed his reservations over the government's decision to start raising a part of its gross borrowing programme from external markets in foreign currencies.

"Given this revenue shortfall, the expectation from the revenue department is the tax/GDP ratio will rise by more than one per cent of the GDP, I don't know how this is going to happen.

"...My plea to government is to immediately issue a white paper if you like that incorporates medium term fiscal framework for next 3-5 years," he said.

According to the Budget document, the government aims to collect USD 370 billion as taxes in the current fiscal.

"In my professional judgment, you will not able to tax as much as has been forecast in 2019-20 Budget. Therefore either you will have to borrow more or you will have to spend less.

"If you borrow more then it has implications for overall economy, or you spend less then it also have implications," Roy said.

Replying to a query on government's decision to go for overseas sovereign borrowing, he said that he thinks there are serous issues regarding loss of sovereignty.

"I don't simple argument that something which is cheaper is good one. I pay very careful attention to the former RBI Governor Y V Reddy's opinion that these are sovereign liabilities to perpetuity," the Economic Advisory Council to the Prime Minister (EAC-PM) member said.

Roy, who is also director of think tank NIPFP, said he will also pay very careful attention to history of this country and why it has not gone down this route in last 70 years despite huge provocations to do so.

"I would urge very respectfully, a public consultation on this subject and public discussion rather than imperial announcement of borrowing programme without taking accounts of these facts," Roy said.

Noting that overseas borrowing by the government would not have impact on current account deficit of India, he said, "I am confused why this(overseas sovereign borrowing) can not be done by issuing rupee bonds...we do not have foreign exchange crisis to this country".