Debt and fiscal consolidation should not be the focus of the government at present and it should rather concentrate on interventions and fastest possible revival of the economy, Fifteenth Finance Commission Chairman NK Singh said Friday. He added employment numbers, along with the agricultural sector and anecdotal evidence from the industry, suggest a sharp recovery is in the process.
“This is not the time to talk of fiscal consolidation. This is the time in which the world believes, I think that what needs to be protected is the expenditure over fiscal deficit and this is exactly what the central government has done … this year we must not concentrate on the fiscal or the debt. We must concentrate on the fastest possible revival of the economy. We must concentrate on ensuring that in terms of the painful transition, the pain is minimised in multiple interventions, and multiple interventions have taken place,” he said, adding these things should concern the Centre and states after sharp economic rebound in coming years.
Speaking to reporters after the meeting of the commission with the economic advisory council, Singh said there are multiple green shoots in the economy pointing towards a recovery. “The fact of a fairly rapid resumption of both employment and economic activity suggest that the recovery process is underway… the fact that employment numbers have gone up very sharply, the huge green shoots in the agricultural sector which has been the least affected. Given the normal monsoon, this time agricultural recovery would be an ingredient of the revival process. FDI flows continue to be modest, sharp recovery in the auto sector. There are multiple greenshoots, and not one green shoot only, covering various sectors of the economy — agriculture, manufacturing and essential services,” Singh added.
He said there is acute pressure on the finances of both the Centre and states given the much lower growth number and revenue receipts. The terms of reference of the Commission includes suggesting a consolidated road map in terms of the deficit, finances, debt of the general government for FY22 to FY26. Noting that nothing suggests that India’s medium-term economic growth potential has been damaged, he said the Commission would deliberate on which fiscal year is to be taken as ‘base year’ for purpose of making projections for the 5-year period.
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