Fiscal Expansion of India
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Transcript of Fiscal Expansion of India
Fiscal Expansion – A necessity to sustain India’s growth momentum
04/12/23 2
India – On a high
• One of the fastest growing economies in the world
• Appreciating Rupee
• Low nominal interest rates
• Controlled Inflation
• Booming services and retail sectors
• Rising foreign exchange reserves
• Increased FII and FDI
A Reality Check
• Agriculture contributes only 20% to GDP
• Agriculture growing at meager 2%
• HDI – a poor 127 in 2005
• Alarming poverty levels – 26% still below poverty line !
• Education : Adult Literacy Rate only 61 % !
• Mortality rate…health issues “55 deaths per 1000 live births !!”
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The SAD part of the story
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Food for Thought• Are we investing enough in critical areas of agriculture, health,
education etc?• Is too much importance given only to fiscal deficit reduction?• Financial discipline is essential, but, can it be at the cost of the
growth of the economy?• What is more relevant in the Indian context – the outright
reduction of the deficit or concentrating on all-inclusive growth?
YES…It is questions like these which compel us
to visit this debate between fiscal restraint and
fiscal expansion in the Indian context
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Fiscal Restraint – Its impact
• Reduced government investment in agriculture
which supports 67% of our population• Reduced government expenditure on social sectors
like education, health• Greater hardships for the poor• Higher taxation rates is a real burden on the middle
class population• Inclusive growth only remains a dream• Reduced investment on R&D
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Focus on Economic Reforms
Tax Reforms
Some of the measures in the form of Direct and
Indirect taxes are:- Varying rates of excise duties on different
commodities Personal tax reduced over a period of time Custom duties have been significantly reduced
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Focus on Economic Reforms
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Focus on Economic Reforms
Public Sector Policy Critical element of India’s reform agenda Limited process of disinvestment of government equity in
public sector companies PSU’s have also resorted to capital markets to raise
resources
The disinvestment helps provide non-inflationary
resources for the Government Budget, without
adding to the fiscal deficit in a way keeping the deficit in
control as well as bringing in more investment in PSU’s
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Focus on Economic Reforms
Financial Reforms Increase in Investments Allocation of resources for efficient uses Capital Markets – Regulation, Dematerialization, New
Products, Risk Management Banking Sector – Deregulation, Liberalization,
Operational Freedom Insurance Sector – IRDA Act, 1999
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Govt Expenditure vs Poverty
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Govt Expenditure vs Poverty
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Our Stand-Point
Inclusive growth requires huge investments in
agriculture, education, health, poverty alleviation
etc, the benefits of which can only be reaped after a
certain lag period.
We perceive Economic growth as the growth of
our industries, services and most importantly,
our people for which short term fiscal expansion
will not be a heavy price to pay.
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THANK YOU ALL
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