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| Edited By: Neeraj Thakur |Source: DNA |Updated: Mar 17, 2018, 03:04 AM IST
With the Union budget just round the corner, the Prime Minister’s Economic Advisory Council (PMEAC) has chalked out a roadmap for fiscal consolidation that calls for expenditure cuts and a partial withdrawal of the tax reliefs given in 2008-09 to stave off a recession.
The council, chaired by C Rangarajan, has said that fiscal consolidation must come more by way of expenditure cuts than
just tax increases. “More of fiscal expansion has come from increase in expenditure than from tax cuts. The reduction in revenue due to cuts in excise duty and service tax is likely to have been around 0.5% of GDP. In contrast, central expenditure as a ratio of GDP increased by more than 2.2 percentage points. This implies that correctives must also focus on adjusting expenditures,” said the PMEAC in a report issued on Friday.
The PMEAC expects the fiscal deficit — the gap between revenues and expenditure before borrowings — to come down by 1-1.5% in the next financial year, 2010-11. Bringing the deficit down would be possible due to a reduction in expenditure on schemes like the farm loan waiver and payment of pay commission arrears. The PMEAC has also advised the finance ministry to control spending on social sector schemes and subsidies to bring down the expenditure by 0.5% of GDP.
The report says that it is important to safeguard capital expenditure, particularly in the infrastructure sector.
The council has also stepped up its economy growth projection to 7.2% this year as against 6.5% made in the last quarter.
The report has once again expressed concern over the lack of momentum in nuclear power technology in India. In October, 2009, also, the council had argued that this was the need of the day.
“It is now one-and-a-half years since India was able to regain access to global nuclear technology, as well as to nuclear fuel. Here is an urgent need to make the necessary regulatory changes quickly, so that investment, including that from established private companies interested in this business, can begin to flow,” the report said.
