Economy

India must stick to fiscal consolidation, says PM Modi's economic advisory council

India must stick to fiscal consolidation, says PM Modi's economic advisory council

The first meeting of the newly-constituted Economic Advisory Council to Prime Minister Narendra Modi will be held today at the NITI Aayog.

The Council was set up in September and comprises Bibek Debroy, Member NITI Aayog as the Chairman, Ratan P Watal, Principal Adviser, NITI Aayog as Member Secretary and Surjit Bhalla, Rathin Roy and Ashima Goyal as part-time members.

However, Debroy categorically stated while the agenda of the council is to suggest recommendations and advise the Prime Minister, any recommendations made or vice versa would not be disclosed to the media.

"Whenever we will take any view on monetary policy, we will discuss with RBI..."

The council has identified ten themes around which a report will be structured in the next few months. These include economic growth, job creation, fiscal framework, monetary framework, social sector, the institution of economic governance among others.

Roy, who is also director of economic think tank NIPFP, however, said the council will examine causes of slowdown.

"We will come out with implementable solutions for economic problems and present them to the Prime Minister", Debroy said after the meeting.

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"There is a consensus amongst us (members of the EAC) that there are various reasons that have contributed to slowdown of growth rate". "Today, it was the first formal meeting".

On joblessness front, Debroy, however, said whether we like it or not we don't have good data on employment. He also alluded to the lack of adequate employment data to make any conclusive assessment of the job scenario in the country.

The five-member Council was unanimous that the government shouldn't stray from the path of fiscal consolidation, thus ruling out a fiscal stimulus to reverse the downturn in the economy. When asked whether the government can breach fiscal deficit to provide stimulus to the industry, Debroy said, "There is a consensus (among the members)... that the fiscal consolidation exercise should not be deviated".

If the government does not deviate from its target of reining in its fiscal deficit at 3.2 per cent of the gross domestic product (GDP), providing stimulus would be nearly impossible.

Earlier this week, the International Monetary Fund had lowered India's growth forecast for the current fiscal by 0.5 percentage points to 6.7 per cent, while the World Bank pegged economic expansion at 7 per cent, down from 7.2 per cent projected earlier.

On IMF lowering India's growth projections, EAC-PM member Rathin Roy said his experience from the past was on 80 per cent of the occasions, IMF projections were incorrect.


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