Ease fiscal consolidation in Budget, hike health spend, economists urge FM

Most economists said that expenditure on social sectors, health and infrastructure should be raised
Economists have urged Finance Minister Nirmala Sitharaman to relax fiscal deficit consolidation in the Budget for 2021-22 (FY22) and make efforts to enhance exports from the country. They also called for raising expenditure on health and focusing on agriculture infrastructure (infra) without which the recent reforms would not hold ground.

In a pre-Budget interaction on Saturday, they said the fiscal deficit framework could be returned to normal after a few years.  Another meeting with economists is slated for Wednesday.

Amid a stressed revenue position and spending pressure to spur economic activity during the Covid-19 pandemic, the fiscal deficit has already crossed the Budget Estimates (BE) by 20 per cent by the end of October.

Fiscal deficit in the first half of the fiscal year touched 10.71 per cent of gross domestic product (GDP), against BE of 3.5 per cent.  Everyone agrees BE no longer holds true after the Covid-triggered lockdown. The actual yardstick should be Rs 12-trillion market borrowings. Fiscal deficit has already touched Rs 9.53 trillion. The government has room for Rs 2.47 trillion of fiscal deficit in the next five months.

Most economists said expenditure on social sectors, health, and infra 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 GDP.

Some said agriculture infra should be strengthened and that marketing reforms will not be enough if not supplemented by a strong focus on developing agriculture infra.

The Rs 1-trillion agriculture infra fund should be spent soon, they added.

Some economists also raised issues that cropped up in the recent national family health survey and said falling nutrition levels in children should be seriously dealt with by strengthening schemes such as Integrated Child Development Services.

A suggestion was also made to provide a fixed time frame for payment to micro, small, and medium enterprises (MSMEs), so that they do not have to wait long for their payment.

Meanwhile, industry chamber PHD Chamber of Commerce and Industry President Sanjay Aggarwal in his interaction with the finance minister suggested a 10-pronged strategy for Budget FY22. This included refuelling consumption and demand, encouraging private investments, front-loading infrastructure investments, setting up development finance institutions to fund industrial and infrastructural investments, strengthening MSMEs, reducing cost of doing business, ease of exporting, increasing tax-to-GDP ratio, focusing on agriculture and rural sector, and effective reforms in social infrastructure.

He endorsed lower personal income-tax rates, saying any such move would increase the tax base and tax-to-GDP ratio.  

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