In a virtual meeting with Prime Minister Narendra Modi, they suggested relaxing the fiscal deficit target in order to push infrastructure spending and steer the pandemic-hit economy back to the growth path, people aware of the deliberations told ET.
One top economist wanted the government to draw up a 10-year road map to make India a $10 trillion economy.
The meeting was attended by 16 economists including former Niti Aayog vice chairman Arvind Panagariya, former chief economic advisors Shankar Acharya, Ashok Lahiri and Arvind Virmani, former New Development Bank chairman KV Kamath and former RBI deputy governor Rakesh Mohan.
Finance minister Nirmala Sitharaman, minister of state for finance Anurag Thakur and minister of state for planning Rao Inderjit Singh attended the two-hour meeting. The budget for FY22 is scheduled to be presented on February 1.
The government on Thursday projected India’s economy would contract 7.7% in the current financial year.
The economists wanted the government to aggressively push its disinvestment agenda, embark on import tariff rationalisation to make India part of the global supply chain, undertake bank recapitalisation and create bad banks to address non-performing loans.
Another person privy to the deliberations said there was a near-consensus among the economists that investments were still not flowing into India in a big way.
“There is a need to boost investor confidence. Government should avoid challenging everything. This is important as investors are still wary of investing in India despite several reform measures,” the second person said.
A case was made to reduce tax compliance to attract investments and facilitate business as also reduce import tariffs to ensure the country can become part of the global supply chain.
The economists suggested the government should come up with export-specific measures to boost outbound shipments as manufacturing will not pick up unless exports pick up. A suggestion was made about India joining the Regional Comprehensive Economic Partnership.
The economists batted for more spending, especially on infrastructure.
“Emphasis was on enhanced spending without bothering about the fiscal deficit at the current juncture, but presenting credible fiscal deficit numbers,” a third person said. “This will help boost demand and consumption.”
Some economists suggested creating a separate ministry, if needed, for privatisation, besides making concerted efforts to improve the tax-to-GDP ratio, which has been low since 2018.
Top officials including finance secretary Ajay Bhushan Pandey, chief economic advisor Krishnamurthy Subramanian, principal secretary to PM PK Mishra and principal advisor to PM PK Sinha attended the meeting, along with Niti Aayog vice-chairman Rajiv Kumar, CEO Amitabh Kant and members of the Aayog.