Centre to tighten belt, step up investment

NEW DELHI: The Centre would have to step up public investment even as it curtails expenditure so as to contain the fiscal deficit, if the economy is to achieve a cumulative growth rate of 8 per cent over the next five years.
Further, the states would have to get their reform act together, including in relation to removing the assorted entry taxes they levy at present. These imperatives were spelt out today at finance minister Jaswant Singh’s consultations with the Planning Commission, led by deputy chairman K C Pant.
Private sector investment might take at least a couple of years more to gather momentum. To stimulate private investment and to pick up the slack in the meantime, the Centre has to step up investment, both to prop up aggregate demand and to generate the needed infrastructure.
Growth, however, depends on significant reform at the state level. Reform is required on many fronts: the power sector, quality of public finance, agricultural policies and infrastructure and urban development.
Most important, however, is the need to remove entry barriers in the form of entry tax, octroi, etc which segment the market and pre-empt the creation of a common economic space.
The government has set up a number of incentive funds for state governments to draw on while implementing reform. These have to be administered efficiently. Apart from this, the FM was also apprised of the need to break the logjam on value added taxation.