Business Desk, ETV Bharat: As public spending and private consumption are on a declining path, the union government should go the ‘extra mile’ and spend more in the upcoming Budget, said a prominent public finance expert.
“As the Covid-19 pandemic played havoc on the economy, the government expenditure over ‘public administration, defence and other services’ shrank 12.2 per cent and private final consumption expenditure fell to 54.2 per cent in the last July-September quarter,” said M Govinda Rao, a member of the Fourteenth Finance Commission.
“As the above data indicate weak demand in the economy, the government should extend its support by increasing revenue as well as capital expenditures,” he added.
M Govinda Rao, who was also the Director of the National Institute of Public Finance and Policy, has said that the revenues for higher spending can come from increased borrowing and monetisation of assets through the disinvestment process.
While elaborating the path to sustained economic recovery, he has advised the government to defer the idea of fiscal consolidation to FY 2022-23.
“The fiscal deficit for the current year is estimated at 7 per cent of the GDP as against 3.5 per cent estimated in the Budget. As the pre-Covid-19 level of output likely to be reached in the last quarter of next year, the government should defer the idea of fiscal consolidation by one more year,” he opined.
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‘Fiscal Council’ is the need of the hour
As the growing ‘off Budget liabilities’ is denting the credibility of fiscal deficit numbers, M Govinda Rao has suggested the government to make a provision for ‘Fiscal Council’ in the upcoming Budget.
“As recommended by the 14th Finance Commission, the Fiscal Council should be established to make Budgets transparent and accountable. The Council must be an independent body and it should be appointed by and reporting only to the Parliament,” he said.
“The Council must be tasked with three things – scientific estimates of the cost of programmes and assessment of forecasts, costing of policies and programmes in a transparent manner and submitting unbiased reports to the Parliament,” he concluded.
