Kicking-off preparations for the upcoming Budget, finance minister Arun Jaitley on Monday held a brain storming session with economists on how to increase productivity of the farm sector, improve quality of expenditure and strengthen the financial sector.
“One very important topic that we spent time on is agriculture and what we could do to increase productivity in agriculture,” minister of state for finance Jayant Sinha said after the meeting at Niti Aayog. With two successive deficient monsoons, the government is concerned about its impact on the rural income and demand, which has a multiplier effect on the economy.
In a recent interview to FE, Niti Aayog member Ramesh Chand said that the government has to go beyond providing price support system and focus on the non-price factors such as such as creating irrigation infrastructure, promotion of marketing, widening insurance coverage and use of technology to raise farm productivity. Agriculture GDP grew by a meagre 0.2% in FY15 and the Reserve Bank of India has forecast the sector to grow 1.5% in the current fiscal year, partly due to an expected better performance in the livestock segment.
The pre-Budget meeting, which was attended by Niti Aayog vice-chairman Arvind Panagariya, chief economic adviser Arvind Subramanian and RBI deputy governor Urjit Patel, also dwelt at length on how to make expenditure, particularly public investment, more productive.
“Third major area that we spoke about is obviously the financial sector… more credit for agriculture, MSMEs and what could we do further to strengthen our banks. The final area that we also spent time on is how to ensure we are able to create more jobs for young people, whether it is in the manufacturing sector or the service sector,” Sinha said.
Economists such as Subir Gokarn, director of research at Brookings Institution India, Ajit Ranade, chief economist, Aditya Birla Group, and Rajiv Lall, vice-chairman, IDFC Ltd, participated in the meeting.
“I think we are in a very good shape as far as fiscal management is concerned. That was appreciated by all economists,” Sinha said. Implementation of One Rank One Pension (OROP) and increase in salary bill due to 7th Pay Commission award won’t strain government’s fiscal position this year, he said. The full implementation of OROP and Pay Commission awards may cost the exchequer between R50,000-70,000 crore in FY17, which could put pressure on the finances of the government, officials have said.
The early consultation with economists would help the government prioritise policy measures during the current fiscal year as well as in the budget for next year.
“Obviously, it is very early in the cycle to start the consultation. But we felt that if there were good ideas, we could incorporate them even in this fiscal year. Obviously, for the preparation of the current Budget, we could begin the work on that right now,” the minister said.