Bring back investor confidence, economists advise Jaitley

Top economists conveyed to Finance Minister Arun Jaitley that focus must be given to domestic market and consumption as the global economy is still not showing positive signs of growth except that of the US.

They also made suggestions on boosting growth, containing inflation, rationalisation of subsidies, containing fiscal deficit and above all, bringing back investors’ confidence among others.

The economists who attended the pre-budget meeting with Jaitley included Abhijit Banerjee, MIT; Partha Mukhopadhyay, CPR, New Delhi; Esther Duflo, MIT; Errol D’Souza, IIM Ahmedabad; Rohini Somanathan, Delhi School of Economics; Chetan Ghate, ISI, Delhi; Niranjan Rajadhyaksha, Livemint; Sabyasachi Kar, Institute of Economic Growth; R Nagaraj, IGIDR, Mumbai; Ajit Ranade, Aditya Birla Group; Tushar Poddar, Goldman Sachs; Sajjid Chinoy, JPMorgan; Sonal Varma, Nomura; Pulapre Balakrishnan, CDS; and Subir Gokarn, Brookings India.

Jaitley told them that his government had taken lot of initiatives in different sectors in the last 7-8 months with an objective to take the economy on a higher growth path. With the growth figures improving and inflation and external fronts under control, macro-economic stability had improved. “The growth deceleration has bottomed out and the revival has started,” he said.

The economists mooted ideas for larger public investment in agriculture, infrastructure sector, including rural infrastructure, among others. They called for fiscal consolidation, change in structure of budget formulation, including adoption of accrual accounting system in place of cash accounting, and maintaining credibility of numbers, raising revenue resources through sales of spectrum, road map for subsidy rationalisation in areas of food, urea and kerosene.

The economists suggested that single window system be implemented both at the central and state level for ease of doing business. Some suggestions were recapitalisation of banks, push in disinvestment to achieve the targets, strengthening of corporate bond markets, establishing an institution for long-term fiscal policy and new fiscal framework, setting-up of independent fiscal committee, institutional framework for managing imports of gold, and setting up of a mechanism to monetise gold such as gold demat.

He was told to consider suggestions for tax reforms including widening tax base, making culture of tax compliance involuntary, not raising the threshold limit of income tax, and tax on agriculture income, setting up more tax tribunals for resolution of tax disputes in a time-bound manner.