Why not have a body to control deficits: Raghuram Rajan

Hyderabad: With less than a month to go for the Union Budget, Reserve Bank of India governor Raghuram Rajan feels that the country should debate on whether it needs independent institutions that control deficits and control the quality of government budgets for maintaining fiscal prudence. “Fiscal prudence is essential [for growth]. Whether India needs more institutions to control deficits and monitor the quality of its budgets is a question worthy of discussion. A number of countries have independent organs that pronounce on budgets. These bodies are especially important in providing budgetary estimates, particularly for unfunded long-term liabilities. As the experience of developed countries has shown, long-term fiscal commitments, such as universal pensions and health care, can be easy to make, but difficult to fulfill,” Dr Rajan wrote in an article in Project Syndicate, released on Monday.

The governor’s statement was part of his overall commentary on the steps that India needs to take to spur growth to lift millions of its citizens out of poverty. However, the remark assumes significance as several economists have been calling upon the government to boost the economic growth by increasing public expe-nditure as the private sector has not yet res-tarted its investments.

In December, India’s chief economic adviser Arvind Subramanian asked the government to increase the public spending to boost economic growth in the medium term as there have been no signs of private investment picking up.

“To revive growth going forward, public investment may have to play a greater role to complement and crowd-in private investment. Consideration should be given to... finding the fiscal space to finance such investment,” he had said, which appear to be in consonance with the government’s pro-growth approach.