NEW DELHI: As India prepares for the crucial Union Budget, which would set course for economic pick-up after the Covid carnage, economists have asked the government to be generous with the fiscal measures and have warned of weakness in the financial sector which could be a problem spot in the upcoming financial year.
A group of leading economists, in their meeting with Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman, on Friday said the government should further recapitalise banks, push for divestment and the focus should be on promoting growth. However, it should be “generous” with recapitalisation plans for banks which are “under strain”.
“The general agreement was that the economy is doing better but there are many trouble spots. Financial sector is a matter of concern and the budget should keep in mind realistic estimates for bank recapitalisation, otherwise the weakness in the financial sector can detail the growth,” a senior economist who attended the meeting, told this publication.
The meeting was attended by Arvind Panagariya, Bibek Debroy, KV Kamath, Rakesh Mohan, Shankar Acharya, Soumya Kanti Ghosh, Abheek Barua, Ravindra Dholakia, Sonal Verma and other members
of the Prime Minister’s economic advisory council.
While the economists appreciated many initiatives taken under the Atmanirbhar Bharat initiative, they have asked the government to relax some of the tariff measures and not to be so rigid in imposing extra tariff. “Increasing tariffs should not be the only way to promote Atmanirbhar Bharat.
There has to be a balancing act. India should not be seen as a close market, if we want to invite foreign investment,” said one of the economists. Sources say that “the Prime Minister was very receptive to the ideas and took note of the suggestions.” He also discussed the impact of the relief packages given so far and asked if any other sectors needed immediate attention. The meeting ahead of the Budget holds importance as the India slowly recovers from its first economic recession.
Fiscal worries to be kept aside
Most economists have agreed that the government should keep fiscal worries aside for this year and be generous with expenditure on sectors which require focus. They also suggested bringing more tax reforms, according to sources.