Fixing agricultural issues, generation of jobs, and fiscal consolidation dominated the deliberations at a pre-Budget meeting on Wednesday between Prime Minister Narendra Modi, his Cabinet colleagues, and economists and sectoral experts. In the day-long meeting, attended also by Finance Minister Arun Jaitley, economists suggested that the fiscal consolidation road map be adhered to, even as corporation tax be reduced from the current rate of 30 per cent. Economists also favoured the re-imposition of the long-term capital gains (LTCG) tax on listed securities and mutual funds, and the extension of the holding period of short-term capital gains (STCG) tax to three years from a year. They also wanted the Budget to have a fresh strategy on disinvestment, sources said.
In his intervention, Modi favoured simultaneous Lok Sabha and Assembly elections.
The meeting was held in the NITI Aayog. The Budget for 2018-19 would be presented on February 1.
In agriculture, sources said, a clear suggestion was to create jobs in rural areas, develop clusters at the district level for specific agriculture products, change the crop geometry, and improve linkage of farmers with markets.
“We made a suggestion that there is no reason why there should be a distortion in the choice between long-term capital gains on debt-based assets and equity-based assets,” said M Govinda Rao, economist and former member of the Economic Advisory Council to Prime Minister, who was also at the meeting.
On suggestions regarding agriculture, he said, “We need to have more investment in agriculture, processing, marketing, logistics, and the like.”
He also said a suggestion was made to rationalise fertiliser subsides to stay on the path of fiscal consolidation. “The government should aim to reduce subsidies and transfers, and aim to increase capital expenditure. For which, we need significant increase in items such as disinvestment,” Rao said.
Employment and the need for high frequency data on employment was also a talking point in the meeting, where sectoral experts were divided into six groups, which made presentations to the PM and his Cabinet colleagues, including Agriculture Minister Radha Mohan Singh, Power Minister R K Singh, and Commerce Minister Suresh Prabhu among others.
The groups dealt with issues such as macro economy, employment, manufacturing and trade, agriculture, health and education, and infrastructure.
“There were suggestions to focus single-mindedly on job creation from here onwards, as, according to some economists, about 20 per cent of the educated youth in the country were unemployed,” NITI Aayog Vice-Chairman Rajiv Kumar told reporters after the meeting. He said the NITI Aayog has constituted a task force on employment and its preliminary findings, to be released soon, has “much better” news on the employment front.
The economists and experts told the PM and the ministers that the government should stick to fiscal deficit targets.
The government breached its fiscal target in the Budget for 2017-18 by November last year; it has touched 112 per cent of the Budget target. This is the highest deviation from the Budget Estimates (BE) for fiscal deficit in the first eight months of a financial year since 2008-09, the year of the global financial crisis.
The Centre has opted for an additional borrowing of ~500 billion this fiscal year, through dated government securities, which is over and above the BE of Rs 5.8 trillion for 2017-18.
Analysts had estimated the fiscal deficit for FY18, on account of the higher borrowing, to be around 3.5 per cent of gross domestic product against the target of 3.2 per cent. Among the revenue items in which the finance ministry stares at a potential shortfall this year are the goods and service tax, and certain non-tax revenues. The target for the next financial year, according to the road map, is 3 per cent.
The economists also said a reduction in corporation taxes could be carried out. Jaitley had promised in the 2015-16 Budget to phase out exemptions and bring down the rate to 25 per cent from 30 per cent. The corporation tax rate has only been reduced for smaller businesses so far.
First Published: Wed, January 10 2018. 23:36 IST