Economists on Tuesday asked Finance Minister Arun Jaitley to balance the need to perk the economy and maintain fiscal prudence in the Budget for 2015-16. They asked the minister not to raise the threshold for income tax exemption, while emphasising on increasing the tax base.
In his pre-Budget interactions with economists, Jaitley said the government was committed to fiscal discipline, as well as regaining investors confidence and reviving the manufacturing sector. He said the fall in economic growth had stopped and macro economic stability had improved.
Those present said a lot of suggestions were given by economists to revive the economy but within fiscal limits. On condition of anonymity, an economist who was present said it was emphasised that a new fiscal responsibility and budget management law should be enacted, as the earlier one had lapsed.
A statement from the ministry said economists advised the finance minister to establish an independent fiscal committee and go for a new fiscal framework.
Some suggestions on taxes including widening the base, not raising the threshold limit of income tax, having a tax on agricultural income and setting-up more tax tribunals for resolution of disputes in a time-bound manner. Those attending included Abhijit Banerjee of MIT, Partha Mukhopadhyay of the Centre for Policy Research, Esther Duflo of MIT, Errol D’Souza from IIM Ahmedabad, Rohini Somanathan with Delhi School of Economics, Chetan Ghate of ISI, Sabyasachi Kar of the Institute of Economic Growth, Ajit Ranade from the Aditya Birla Group and Subir Gokarn from Brookings India.
Jaitley said the government had taken many initiatives in different sectors in past months, with an objective to take the economy on a higher growth path. Macro stability had improved, with growth up and the inflation and external fronts under control.
Economists also suggested that focus be given to the domestic market and consumption, as the global economy was still not showing positive signs of growth, except in America, according to the ministry statement. Major suggestions included focus on boosting growth, containing inflation, rationalisation of subsidies and bringing back investors’ confidence.
They also called for changing the structure of budget formulation, including adoption of an accrual accounting system in place of cash accounting, and maintaining the credibility of the numbers and a schedule for subsidy rationalisation in food, urea and kerosene.