Govt may deviate from fiscal deficit path to boost growth

New Delhi: To promote growth, the government could consider deviating from fiscal deficit path for the next financial year and focus more on public spending, suggested economists at the pre-Budget meeting with Finance Minister Arun Jaitley.

There was also discussion on the present tax and subsidy regime and need for their transformation for improving growth during the meeting.

The Director of Indira Gandhi Institute of Development Research, S Mahendra Dev, said: "One is the fiscal deficit.

Basically, we said that there can be some deviation but one has to adhere to fiscal deficit target in the medium term.

Some deviation can be there for 2016-17."

As per the revised fiscal consolidation roadmap, the government proposes to bring down fiscal deficit from 3.9 percent in the current fiscal to 3.5 percent in 2016-17.

The target seems slightly challenging in the light of rise in wage expenditure. In a big bonanza to central employees and pensioners, the 7th Pay Commission has recommended a 23.55 percent increase in salary, allowances and pension, along with a virtual one-rank-one-pension for civilians, involving an additional outgo of Rs 1.02 lakh crore a year.

The recommendations will benefit 47 lakh central government employees and 52 lakh pensioners, which will impact the central Budget by Rs 73,650 crore and the Railway budget by Rs 28,450 crore.

Secondly, there was discussion on giving rural push as agriculture is in bad shape.

"Unless we have good monsoon, agriculture growth won't be there...we need have more manufacturing and services. Lastly, there is need for push in social sector expenditure particularly on health because health risks are much higher," he said.

J P Morgan chief economist Sajjid Chinoy said every issue was discussed and there was massive divergence among economists on some issues.

He, however, did not elaborate on the key issues discussed in the meeting.

Pulapare Balakrishnan, Professor of Economics at Ashoka University, said there were discussion on fiscal deficit and deviating from the path.

Besides, Balakrishnan said there was discussion on tax and subsidy regime and how it can be transformed.