In Union Budget 2021, come clean on fiscal deficit, says Montek Singh Ahluwalia

Singh acknowledged that the Centre's consumption expenditure has had a huge increase

Ahead of the Union Budget Session 2021, former deputy chairman of the erstwhile Planning Commission, Montek Singh Ahluwalia said that the Covid-19 pandemic can be an opportunity for the government to 'come clean' on the fiscal position and also the simplification of the Goods and Services Tax (GST) process, in order to untangle the Indian economy from the current crisis, according to The Mint.

Montek Singh Ahluwalia said that the Central government's consumption expenditure has had a huge increase, which can be assumed by the latest Central Statistics Office projection of a 7.7 per cent GDP contraction in the current year.

He said that the Indian economy was not the only one to be hit by the pandemic, so it was not the time to worry about budget targets, which have become irrelevant not just in India, but globally. "The FRBM (Fiscal Responsibility and Budget Management Act) has become utterly irrelevant. And that is not true just for India, that is true everywhere," he told The Mint.

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“But we must know that figures after October do not show that. If you want to limit the contraction to 7.7 per cent, that implies an expenditure boost in the rest of the current year. The finance minister in her statements has said she was going to spend without too much regard to what it would do to the fiscal deficit in the current year. I think that is correct. We have to see how the budget numbers come out," Ahluwalia said.

"I think, the key issue is, is this the time to come clean? I would very earnestly suggest that this is the best time in the world for the finance minister to say, 'Look, nobody in the right mind would expect me to stick to 3.5 per cent (fiscal deficit target) if you have a huge decline in GDP and loss of revenue.'," Montek said, adding that the government also should be upfront about off-budget spending.

He suggested to the Union Finance Minister Nirmala Sitharaman, through the daily, that the fiscal deficit could be 6.5 per cent plus, to which off-budget items should be added, and it could easily come to “between 7 per cent and 8 per cent.

Also Read: Budget 2021 | What is fiscal deficit?

"The tendency to defer paying bills which results in reduced expenditure was not the right thing to do. For the next fiscal, the bounce back in revenue may not be sufficient and the government could take many more specific steps to boost revenue receipts," he told The Mint.

On the GST front, Montek bid to simplify the process and take suggestions from the council, saying, “The finance minister could take the proposal for a massive simplification of GST to the GST Council and do what the experts are saying would be the way to get more revenues. And in addition to that of course, is asset sales."

He stressed that the Centre must have been more generous to the poor and ensure that funds are released to states for the rural employment guarantee scheme so that no state falls short in offering rural jobs for want of funds.

He asked the ruling government to bear the cost of vaccination programs across the nation and not just for a selective 300 million people.