Call for revamp of fiscal policies

VADODARA: Chairman of the 12th Finance Commission C Rangarajan said on Saturday the fiscal policies should be restructured to accelerate growth along with macro-economic stability. Addressing the 39th annual conference of the Indian Econometric Society (IES) here, he said the main elements of fiscal restructuring package for growth were reprioritisation and better expenditure management, improved tax administration and better tax laws, widening the tax base and reducing exemptions and improvements in the non-tax revenues. The public spending in the areas of roads, water supply, power, primary education and primary health should be raised to provide appropriate physical and social infrastructure necessary for growth, the noted economist felt. The problem would have been a simple one had there been some fiscal space for augmenting such expenditure which unfortunately is not the case, Rangarajan said. Failure to step up expenditure on the necessary items would dampen the growth momentum of the economy while failure on the fiscal consolidation front, on the other hand, would entail risks on the balance of payments fronts in the short run and growth itself in long run, he said. Emphasising the need for a sound fiscal system to sustain growth with equity, Rangarajan said the resource transfer must be an integral part of system facilitating efficient use of resource, accelerated growth and balanced regional development. Talking about the current fiscal situation, Rangarajan said the task of designing a fair and robust scheme of fiscal transfers has become progressively more demanding in India as both the Centre and the states have continued to nurse mounting deficits on their revenue accounts along with increases in overall fiscal deficits. According to him, an exercise of resource transfers and redistribution in the context of all round deficits, is qualitatively different from the situation when the Centre and some states had revenue surplus. One might wonder as to what the magnitude of revenue imbalance would be in 2004-05, the year immediately preceding the reference period of 2005-06 to 2009 to 2010, for the 12th Finance Commission, he said. The economy, he said, is far from achieving the targets suggested by the 11th Finance Commission and the availability of actual budget estimates for 2002-03, could be worse, he feared. The macro-economic parameters have also fallen short of expectations around which the 11th Finance Commission had outlined its plan for restructuring of public finances, he said. Unless the public savings rate increases by a large margin, much of the increase in the public sector investment envisaged would have to be met by additional borrowing. In that situation, both the corporate sector and the government will be competing intensely for the transferable portion of the household savings, he observed.

Call for revamp of fiscal policies

Chairman of the 12th Finance Commission C Rangarajan said on Saturday the fiscal policies should be restructured to accelerate growth along with macro-economic stability.

More from our Partners

Popular Categories

Hot on Web

In Case you missed it

Top Searched Companies

Latest News

Download ET APP

Follow us on

become a member