Fiscal prudence essential to sustain high economic growth, says PMEAC Chairman

Fiscal prudence is essential to sustain a high economic growth, said C. Rangarajan, Chairman, Prime Minister’s Economic Advisory Council.

While not opposed to subsidies as even poor economies need to provide support, the subsidies should be “targeted and prudent’’, he said.

The Government should be appreciated for hiking diesel prices and announcing a cap on the supply of subsidised cooking gas, liquefied petroleum gas.

Targeting a reduction in expenditure is essential to bring down the fiscal deficit to rein in debt and avoid increasing interest outgo. Mounting interest burden only eats into tax revenues and the money needed for development work.

The Central and State Governments have enacted the Fiscal Responsibility Act, which is a commitment to keep the fiscal deficit at less than 3 per cent of GDP, and these are “good rules to follow,” he said, addressing the annual day celebrations of the Madras School of Economics, of which he is the Chairman.

Talking to media persons, he said the Government hopes to achieve an average GDP growth of 8.2 per cent over the next five years. The economic growth could be lower, including about 6.7 per cent in the current year and increasing to about 9 per cent later.

The second half of the current year will see better growth as agriculture picks up on the back of the revival of monsoon.

He pointed out that despite the hike in diesel prices, the Government and oil companies were bearing two-thirds of the increase in crude oil prices and just about a third had been passed on to the consumers.

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