WB Report Stresses On Reducing Fiscal Deficit

New Delhi, Sept 17: | Updated: Sep 18 2003, 05:30am hrs
The government should reduce primary deficit at the Centre and in states by carrying out tax reforms, reducing power sector losses and phasing out petroleum subsidies, said former World Bank vice-president Mark Baird here on Wednesday.

Releasing the World Banks economic report, India: Sustaining reforms, reducing poverty, at the Assocham-NCAER forum, Dr Baird said that India should reduce financial sector risks by implementing the securitisation law, linking returns on PFs and small savings to market benchmarks and establishing a clear framework for managing state guarantees. Dr Baird is the principal author of the report.

The report emphasised on the elimination of exemptions, bringing of services into the service net and implementation of a uniform state value-added tax as some of the important fiscal measures.

The report has also suggested greater fiscal discipline on state borrowing and transfers. It has recommended the removal of artificial distinction between plan and non-plan expenditures. Another pertains to the consolidation of Centrally-sponsored schemes. It is not right to presume that India can get out of the present fiscal situation without taking appropriate measures, he said.

According to the World Bank, the government should improve the composition of public expenditures by reducing the share spent on wages, pensions, interest payments and agricultural subsidies. It should also do so by increasing investment and operations and maintenances for priority social, infrastructural and agriculture programmes.

In his presentation, Dr Baird laid great emphasis on the delivery of public services. The performance of the civil service and quality of its delivery should be enhanced by improving access to information, strengthening accountability and reducing political interference. He made an interesting point by saying that the government servants to population ratio in India is not very high. In fact, it is lower than that in many developed countries. However, 90 per cent of the government employees are class three and class four employees. The balance is skewed, he said.

The report has suggested improvement in the private market for health care. Priorities for public funds are to provide clean water and sanitation, and to combat communicable diseases, including the prevention of HIV-AIDS.

The report has favoured speeding up of trade reform by reducing average import tariffs and phasing out tariff exemptions, specific tariffs and anti-dumping duties. It has also suggested the removal of other product market distortions by eliminating preferential policies for small players.

Recommending labour reforms, the report has favoured easing restrictions on hiring and firing of workers, improving access to credit for small and medium-size enterprises, addressing problems in the use and transfer of land and updating bankruptcy procedures.