Finance Minister Nirmala Sitharman recently hosted the first customary pre-budget meet, which was attended by several renowned economists, such as chief economic advisor V. Anantha Nageswaran, TCA Anant, Ashwani Mahajan, Arun Kohli, etc.
Who collectively praised the minister for continuing capital expenditure while advising for fiscal prudence, the creation of more jobs, curbing freebies and inflation, and a huge no for reckless giveaways.
Fiscal Prudence: what and why is it important?
Economists also advised the FM to practice fiscal prudence, which means making careful decisions about spending and investment to avoid excessive debt and ensure sustainable levels of fiscal deficit.
During the interim budget, the government had already declared FY25 fiscal deficit goal to be at 5.1% of the GDP; the deficit for FY24 was 5.6%, against the targeted goal of 5.8%. The government expects to cut down the fiscal deficit to 4.5% by FY26.
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Praise on increasing Capex
The government’s decision of sustained growth in capital expenditure post-pandemic was well acknowledged by the economists, as they urged continuing the momentum of expenditure in a similar manner.
Centre has been increasing its capital expenditure by 17-39% annually and has already provided an outlay of INR 11.11 lakh crore in the interim budget, which is roughly 17% higher when compared to the previous year.
Lower tax burden
In the wake of falling private final consumption expenditures, economists have suggested indexing some tax exemptions, including income tax for individuals.
By doing so, the government will be able to increase the disposable incomes of the people, eventually increasing the consumption in the economy and further aiding the economic growth of the country.
Some other suggestions
Several economists in the meeting also raised concerns about possible dumping by China in Indian markets as the US and EU have already put a huge tariff on Chinese EVs and emphasized India doing the same.
Former Chief Statistician of India TCA Anant suggested the need for a new inflation index namely Producer Price Index.
Amongst all the other issues, a common recurrent theme followed, the demand for jobs and job creation, which cannot be ignored in the budget. As recent data shows, not only has growth reached an all-time high of 45 years, but so has unemployment.
About Author
Akshat Jain is a postgraduate student from School of Economics, DAVV. He is interested in economics and research.
