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India requires increased revenue mobilisation says IMF Chief Economist Gita Gopinath
At the 92nd Annual Convention of FICCI, Ms. Gita Gopinath, the Chief Economist with IMF stated that India needs to lead up to its fiscal target. This could be achieved by expenditure rationalisation and increased revenue mobilisation. She mentioned that in the past few quarters, a steep slowdown in the private sector demand is seen along with a week growth in investment. If this weak investment continues, it is surely going to affect the potential growth of the country.
According to Ms. Gopinath, “In India, macro stability is very important. It means stability on fiscal front. A clear sense of keeping to the target of fiscal consolidation is very important. That would require increasing revenue mobilisation and rationalising expenditure as well.” She added that in Budget 2019, the finance minister reduced the fiscal deficit target to 3.3% from 3.4% earlier for the year 2019-2020. But against that, they stayed with the existing borrowing plan for the financial year despite a sharp cut in corporate tax rate which is expected to cost around Rs. 1.45 lakh crores.
She opined that if we talk of fiscal consolidation as a medium-term target, then that is something to be addressed over a period. It is not to be thrown in overnight. The consolidated deficit, Centre and States together, is the highest among the G20 nations, and must be managed very carefully. Be it by undertaking reforms, both micro and macro economical, but there is a dire need for them to happen at this point of time.
Regarding the GST, she stated that India must have greater clarity and greater certainty about the reforms they introduce. India should have a larger presence on the export front and should make bigger reforms to get manufacturing on ground along with land acquisition and labour laws.
She suggested that the positive part with this government is that they are in majority and so should pass the much needed mandates for necessary reforms. She indicated that otherwise, India would lose in terms of shifting global supplies, as assumed globally.