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Fiscal deficit can be pruned by widening tax base by 3 pc, says IMF

The successful widening of tax base by another three per cent will enable the Indian governmenty to bridge the fiscal deficit effectively, says the executive director of the International Monetary Fund M R Sivaraman.

He was addressing the Indian Merchants' Chamber in Bombay this week.

Sivaraman said that India had been living with fiscal deficit in the past many years as the government was not able to control its expanding wage bill and reduce losses incurred by the public sector undertakings.

But this state of affairs is no different even in developed nations like the USA. In the last two years, India's fiscal deficit was about seven to nine per cent per annum. It has a programme for borrowing Rs 960 billion this year against its interest payment obligation of Rs 750 billion on national debt. The gap of Rs 210 billion will be utilised for covering revenue deficit.

Foreseeing bright prospects for Indian industry both in short and long terms, he said that the apprehensions stemming from US sanctions and impact of south east Asian currency crisis are unwarranted as the country is firmly set on the right path.

He said that the agriculture sector which accounts for 29 per cent of gross domestic product is expected to perform well this year. The services sector which contributes 42 per cent of the GDP, is expected to grow by 8 to 9 per cent. The overall economic growth rate is expected to be more than 6 per cent in the current fiscal year, the IMF director emphasised.

He said the people should not ignore many giant strides in economic reforms taken by the Centre in the past three years. While the implementation of the reforms in India is slow, once such reforms set in, they remain stable and transparent. Only the self-confidence of the people will help India to emerge as a leading economic power, he added.

UNI

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