Economists have urged finance minister Nirmala Sitharaman to relax fiscal deficit consolidation in the Budget for 2021-22 and make efforts to enhance exports from the country. They also called for raising expenditure on health and focusing on agriculture infrastructure without which the recent reforms would not hold ground.
In a pre-Budget interaction on Saturday, they said that the fiscal deficit framework could be returned to normal after a few years. Another meeting with economists is slated for Wednesday.
Amid the stressed revenue position and spending pressure to spur economic activity during the pandemic, the fiscal deficit has already crossed the Budget estimates by 20 per cent by the end of October 2020.
Fiscal deficit in the first half of the fiscal touched 10.71 per cent of gross domestic product (GDP) against the Budget estimates of 3.5 per cent. Everyone agrees that Budget estimates no longer hold true after the Covid-induced lockdown. The actual yardstick now should be Rs 12 trillion market borrowings. Fiscal deficit has already touched Rs 9.53 trillion. As such, the government has space of Rs 2.47 trillion of fiscal deficit in the next five months.
Most economists said expenditure on social sectors, health and infrastructure should be raised. On health the general consensus was that expenditure on health should be raised to much more than 1.25 per cent of the GDP.
Some said agriculture infrastructure should be strengthened and marketing reforms will not be enough if not supplemented by a strong focus on developing agriculture infrastructure.
The Rs trillion agriculture infra fund should be spent soon, they said.
Some economists also raised issues that cropped up in the recent national family health (NFHS) survey and said that falling nutrition levels in children should be seriously dealt with by strengthening schemes such as the Integrated Child Development Services (ICDS) etc.
A suggestion was also made to provide a fixed timeframe for payment to MSMEs so that they do not have to wait for their payment for long.
Meanwhile, industry chamber PHDCCI president Sanjay Aggarwal in his interaction with the finance minister suggested a 10-pronged strategy for the Budget 2021-22. This includes refueling consumption and demand, encouraging private investment, front-loading infrastructure investments, setting up development finance institutions to fund industrial and infrastructural investments, strengthening micro, small and medium enterprises, reducing cost of doing business, ease of exporting, increasing tax-to-GDP ratio, focusing on agriculture & rural sector and effective reforms in social infrastructure.
He batted for lower personal income tax rates, saying any such move would raise the tax base and tax-to-GDP ratio.