NEW DELHI: The Centre should accelerate the pace of stake sales in state-run companies, unveil a fresh fiscal roadmap, recapitalise banks, reduce import duty, leading economists told Prime Minister Narendra Modi, while backing the government's structural reforms, including those related to the farm sector.
The PM’s meeting with economists comes ahead of the February 1 Union budget that is expected to unveil fresh measures to revive growth, which has taken a massive hit due to the Covid-19 pandemic.
Finance minister Nirmala Sitharaman, Niti Aayog vice chairman Rajeev Kumar, CEO Amitabh Kant and other top officials from the PMO and finance ministry were present in the meeting, held over video-conference.
Sources said there was a suggestion to undertake reforms and have a roadmap to make the country a $10-trillion economy in 10 years. A participant suggested that the government should remain firm on farm reforms, while another suggested that it should not challenge tax arbitration awards, like the one on Vodafone.
"All those present agreed that high frequency indicators are showing signs of a strong economic recovery, and that too earlier than expected. They were broadly in agreement that next year will see robust growth and suggested measures to maintain this growth rate to drive India’s socio-economic transformation. The participants in the discussion highlighted the strong structural reform measures that have been undertaken in the past few years and how they would help in the creation of an Atmanirbhar Bharat. Suggestions were made by participants on future reform areas," an official statement said.
Modi told the economists that along with fiscal stimulus, the government had also tried reform-based stimulus, which was seen through historic reforms in agriculture, commercial coal mining and labour laws. "The PM explained his vision behind an Atmanirbhar Bharat, where Indian companies are integrated in global supply chains in a manner not seen before," the release said.
Economists also suggested spending on infrastructure to help sustain the economic recovery.
Sources said there was support for production-linked incentives and suggestions to ensure that India becomes part of the global supply chain. Some economists suggested that the Centre examine the issue of joining the mega regional trade block RCEP.
There was discussion on the issue of fiscal deficit and the need to step up infrastructure spending. “There were suggestions that the fiscal deficit target could be eased to ensure infrastructure spending,” said a source.
Participants also urged the government to undertake efforts to revive investor sentiment and ensure that investors are attracted given the raft of reforms that have been undertaken. Some economists also suggested creation of a bad bank to tackle the issue of bad loans while others talked about massive recapitalisation of banks. “There was a suggestion that a bad bank can be set up within a large bank,” said a source.
Some participants spoke about the need to have health insurance for the middle class while others backed the idea of providing digital infrastructure for poor students to carry on with online classes.
Several top economists such as former Niti Aayog vice chairman Arvind Panagariya, former CEA Shankar Acharya, former CEA and ex-deputy governor of RBI Rakesh Mohan, former CEA Ashok Lahiri, former ICICI Bank chairman and managing director KV Kamath, SBI group chief economic adviser Soumya Kanti Ghosh, former MPC member Ravindra Dholakia, Nomura economist Sonal Verma, economist and commentator Ila Patnaik were among those who participated in the deliberations.
Sitharaman will present her budget against the backdrop of a sharp contraction of growth and massive dip in revenues. On Thursday, the NSO forecast GDP to contract 7.7% in 2020-21 due to the impact of the pandemic-induced lockdown that stalled economic activity. Recent data has shown that the economy is scripting a swift recovery and is expected to return to growth in the third and fourth quarters of the current fiscal year.