India has a lot of scope for reducing some food and fertilizer subsidies, while also taking steps to ensure that the growth is inclusive and poverty is reduced, according to Paul Mauro, the International Monetary Fund’s (IMF) Fiscal Affairs Deputy Director.
Asked at a news conference in Washington on Wednesday about the impact that “populist” election promises would have on government deficits, Mauro said: “When one looks at proposals, the important thing is to look at the benefits but also look at the costs and to look at the details.
“There is a lot of scope for reducing untargeted food and fertiliser subsidies and for enhancing revenue administration, including for the GST,” he said, adding that improved tax compliance would be a priority for India.
“The economy is growing in excess of 7 percent, and the objective there is to make sure that that growth is inclusive and it filters down to poverty reduction,” Mauro said.
In evaluating the proposed schemes, one has to look at the whole package of how they will benefit the people and how they will be financed.
“Ultimately what matters is the combined distributional impact of the transfer policies and also of the taxes that would finance them.”
The Fiscal Monitor report, that was released at the news conference, noted that the “recently announced farm-income-support programme alongside weaker-than-expected goods and services tax revenues led to a deterioration (of the deficit situation) relative to the previous central government budget outturn”.
The ‘Pradhan Mantri Kisan Samman Nidhi’ (PM-KISAN) scheme announced in the interim budget will give small and marginal farm households a guaranteed annual income support of Rs 6,000.
The report also noted that “the general government deficit declined by one-third percentage point of GDP in fiscal year 2018-19”.
The report said that digitisation helped reduce fraud and also introduced economies.
“For example, the adoption of an electronic platform for managing a social assistance program in India resulted in a 17 percent decline in spending with no corresponding decline in benefits.”
The use of smart ID cards to identify beneficiaries of specific programmes and improve beneficiaries’ access to information in Andhra Pradesh helped reduce leakage by 41 percent, the report added.