The government has been missing its budgeted fiscal targets for the past few years and there is a need for a “credible fiscal consolidation” which is more ambitious as well, the official said, adding this is more so as government has not addressed how it will make up for the massive Rs 1.45 lakh crore tax giveaways in the form of corporate tax cuts.
The comments come amid allegations of the budget math not adding up with some pointing to a Rs 1.7 lakh crore hole in the estimates, and also over 100 economists questioning the official data computation.
“Fiscal transparency should be increased. It is fairly difficult for the private sector to get the full picture on fiscal standing,” the fund’s deputy director Anne-Mary Gulde said speaking at an NSE event here.
“India is somewhat lacking in a programme on G20 data initiative on fiscal transparency where comparative countries have all made greater progress,” she added.
She said there is also a need for more credible fiscal consolidation as such a move will help reduce the relatively high level of debt and free up financial resources for the private sector.
Fiscal stimulus is not possible to revive the sagging growth due to the relatively high level of public debt compared to the emerging economy peers, she said.
Welcoming the steep corporate tax cuts to get the levies at par with competition, she rued that so far little has been done to offset the revenue impact of the same.
“We feel that the revenue impact needs to be considered going forward and compensated for…we would urge that fiscal policy be formulated against more realistic background to give a more clear direction to private sector expectations,” she said.
She also advocated using monetary policy tools to support the recovery and asked for the same to continue till revival is achieved, adding growth would have fallen further in the second quarter than the previous one.
“We see structural challenges and a weak cyclical position; we need to look at policies that address the cyclical weakness which will also address the structural challenges going forward,” she said and called for urgent reform measures in the labour, land and factor markets to revive and sustain growth.
The IMF official said the ongoing mergers of public sector banks must be done “cautiously” and pitched for a relook at both governance and efficiency of capital allocation at state-run lenders.
In an apparent comment at the troubled NBFC sector, she said while such smaller institutions are not very important, they have caused a dent in the credibility of the system which warrants extra focus.