NEW DELHI: In the pre-budget meeting with finance minister Nirmala Sitharaman on Monday, economists have advised the government to revert to the fiscal responsibility and budget management (FRBM) targets, if not immediately but in the medium term.
The FRBM Act mandates the government to limit the fiscal deficit to 3%. Currently, India’s fiscal deficit is at 6.4% of the GDP. According to the sources, the economists present in the meeting discussed a number of issues including ways to ensure that the economic recovery is shielded from the global headwinds.
“Some economists talked about various measures needed to revive the rural economy, while some recommended bringing an urban employment scheme in line with MNREGA. There should be a road map for reverting back to the 3% fiscal deficit target,” one of the sources said.
They also recommended the government continue its capital expenditure strategy. In the 2022 budget, Sitharaman announced a 35% jump in capital expenditure from Rs 5.54 lakh crore to Rs 7.5 lakh crore.
“Some people suggested since the government has seen very robust growth in tax collection, it can look at lowering some tax rates (either personal income tax or consumption taxes) as a stimulus to the recovery process. Right now they are getting much more than what they are predicting in terms of tax collection,” another source said, who didn’t want to be quoted.
In the meeting, there were Aditi Nayar, Chief Economist at ICRA; Santanu Sengupta, Chief India Economist, Goldman Sachs, among others.