The Economic Advisory Council to the Prime Minister has recommended a Goods and Services Tax Council-like mechanism for the Centre and states to strategise public expenditure for maximum impact, The Indian Express reported on Monday.
“This [GST Council] was about indirect taxes,” the council’s Chairman Bibek Debroy said. “Time has now come for a similar body on public expenditure to do exactly what the GST Council did for taxes. This body should decide on what should be public expenditure.”
“The key question today is whether we are on a 7% GDP growth rate trend, or a 6% trend,” Debroy added.
The statement came at a time when the government is battling decreasing government revenues and reduced consumer demand. To discuss this slowdown, the Prime Minister’s Office and the finance minister have reportedly met various stakeholders over the last week.
Debroy said questions were raised within the advisory council on whether the slowdown was cyclical or structural in nature. “If I just look at it from an academic point of view, I’d probably say, yes, to expanding the fisc,” he said. “But looking at the past, the moment you open the tap, there is no controlling it.”
Debroy stated fiscal consolidation as a reason behind the recommendation. He said focused and strategic expenditure by the Centre and states together could yield efficiency gains. The target of the Centre’s fiscal deficit is 3.3% of GDP this year. The government will have to keep its expenditure within this limit as fiscal deficit crossed 61% of the target in June.
Economic growth slipped to a five-year low of 5.8% in the January to March quarter. This was the slowest pace of growth in 17 quarters. A number of economists have also raised questions about the methodology of assessing official growth numbers.
Last week, Prime Minister Narendra Modi, during his Independence Day speech, reiterated his government’s goal of growing India’s economy to $5 trillion by 2024, and said India needed to make “high jumps” instead of making incremental progress. However, the Congress had accused Modi of reducing international investment in the country, damaging trade ties, weakening the currency “to historic lows”, and disrupting the export industry.