Former deputy governor of RBI Subir Gokarn has said that the new government at the Centre should be judged more by the composition of its spending plans than how its fiscal deficit looks.
Talking to The Indian Express, Gokarn said a breakdown of the spending plan will also inform the measures this government plans to undertake to revive investment. “The quality of the fiscal intentions is more important than the numbers, per se,” he said.
Gokarn was speaking in the context of the current debate that the government will rework the fiscal math of former finance minister P Chidambaram who had claimed that the deficit had come down to 4.6 per cent of the GDP in the last year of the UPA government.
The current director-research at Brookings India said there is no doubt that the coming in of a new government is an opportunity to clean up the slate on fiscal deficit numbers and the elements of the budget. “All pending issues about the fiscal position should be addressed,” he added saying this will give confidence that the subsequent numbers will be accurate.
Looking ahead, he said, “Strategy of fiscal correction is again, more important than the estimates. How are you going to improve revenue — tax reforms is a longer term affair for instance than large scale disinvestment which can be done immediately.”
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Gokarn’s advice is significant as the RBI is expected to speak in the same vein to the new finance ministry in the run up to its monetary policy. “Public investment is a catalytic force. This has been vividly shown by the highways programme.”
The current pace of construction of the infrastructure sector is piecemeal, he added.