Taming the fiscal deficit

24 JAN,2021 | MEDC


 

India needs more fiscal space to address the ongoing health crisis and accelerate its movement to a digital and green economy. In this regard, taming the spiralling fiscal deficit is vitally important. By some estimates, India’s fiscal deficit for the year ending March is likely to be around 7% of GDP. The government should try to reduce the fiscal deficit, but in a manner that will not impact social spending, which is essential for economic revival at this juncture. Policymakers should aim to make India an attractive global investment destination by creating an environment of certainty around taxation, and enhancing the ease of doing business in the economy. The budget should create an atmosphere enhancing the competitiveness of PSUs and put more emphasis on the execution of infrastructure projects. This is also a great opportunity to simplify India’s tax structure and incentivize compliance.In the long run it is the adoption of reforms promoting high growth that will enable fiscal consolidation, because both revenues and GDP will grow faster.

*Photo Credit: Google

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