Ahead of the upcoming Union Budget on February 1, Nobel laureate Abhijit Banerjee Saturday said the fiscal deficit had been breached by a huge margin already and it wouldn’t be wise to follow the path of fiscal tightening at this juncture.
“Fiscal deficit has been breached by a huge margin already. In that sense, I don’t think that it’s a big deal to breach it more. I wouldn’t be supporting fiscal tightening right now,” news agency ANI quoted him as saying.
India’s fiscal deficit hit 114.8 per cent of 2019-20 Budget estimate at Rs 8.07 lakh crore at the end of November 2019, official data showed. The government had estimated the fiscal deficit for the current financial year at Rs 7.03 lakh crore, aiming to restrict the deficit at 3.3 per cent of the gross domestic product (GDP).
With the first advance estimates pegging the nominal GDP at Rs 204 lakh crore, the fiscal deficit is likely to breach the Budget target of 3.3 per cent of the GDP to 3.4 per cent of the GDP.
On media reports that the Centre was mulling to cut the education budget by Rs 3,000 crore, Banerjee said, “The federal govt provides very little of the funding in education. Education is a state subject, and it is mostly funded by the state. Cutting Rs 3000 crore is like a drop in the ocean.”
In last year’s Budget, Union Finance Minister Nirmala Sitharaman had announced the allocation of Rs 94,854 crore for the education sector, of which Rs 400 crore was dedicated to developing ‘world-class’ higher education institutes. in 2017, the sector received Rs 83,626 crore from the Centre.
Sounding the alarm on the state of the Indian economy, Abhijit Banerjee said at the Express Adda last week “we are extremely close to a tipping point of a major recession”. Comparing the slowing growth of the economy to the 1991 economic crisis, Banerjee, who along with Esther Duflo and Michael Kremer won the 2019 Nobel Prize in Economics, suggested that the focus should be on stimulating demand to revive the growth story.
Prime Minister Narendra Modi had on Thursday chaired a meeting with leading economists and experts, organised by government think tank NITI Aayog. While top Cabinet ministers, including Home Minister Amit Shah, attended the meeting, Sitharaman was not part of the deliberations.
The pre-Budget consultation was held in the backdrop of the Modi-led government coming under severe criticism for its failure to take steps to improve the slowdown in the economy. The sliding growth rate, as well as intensifying joblessness, have worsened the situation. The first full Budget, after the Modi government returned to power with massive popular support is being looked at with great expectations, said a party leader.