Economists have cautioned the government against rising protectionism and urged it to reduce customs duties on certain items in the Budget for 2021-22.
“Economists gave varied suggestions. One of them was to lower some of the import duties. We should be more outward-looking than inward-looking,” a source said.
The remarks assumed importance as the World Trade Organization (WTO) has taken up the trade policy review of India where hikes in customs duties have emerged as one of the major topics. A WTO report said India’s average tariff had increased to 14.3 per cent in 2020-21 from 13 per cent in 2014-14.
In a virtual interaction with the prime minister ahead of the Budget, one of the economists even wanted India to join the Regional Comprehensive Economic Partnership.
Economists suggested how to bring growth back to normal. That was the dominant theme discussed, sources said.
Official advance estimates have projected gross domestic product (GDP) to decline by an unprecedented 7.7 per cent in the current fiscal year, though this is better than what was expected after the economy contracted 23.9 per cent in the first quarter of the year.
They also called for rationalising personal income tax taxes, sources said.
The government should tap savings which have increased during the Covid times, they suggested to the prime minister, they suggested.
Besides Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman, officials of the finance ministry, Prime Minister’s Office, and the NITI Aayog interacted with the economists.
There were 16 economists in the meeting. Each of them was given four minutes to talk, and share their ideas on the state of the economy and the priority areas to focus on.
None of the representatives from the government shared their ideas. It was more of a unidirectional discussion — from economists to the PM, sources said.
Economists also wanted the Budget to further rationalise corporation tax and the GST Council to further alter the indirect tax rates.
Experts also suggested to Sitharaman that the direct taxes code (DTC) should be implemented. They asked the government to change the fiscal consolidation road map in light of new developments.
Fiscal deficit scenarios for FY22 and ways to strengthen the banking system were given more importance. Against the target of 3.5 per cent of GDP, the Centre’s fiscal deficit would be a bit over 6.1 per cent in the current fiscal year. Economists called for giving further leeway to prop up the economy.
They asked the government to further recapitalise the public sector banks in these difficult times and called on the government to stabilise the rupee.
Pitching for further consolidation of public sector units, they said resources will have to be tapped to prop up the economy and one of the ways is disinvestment and privatisation. They also expressed concern over the rising retail price inflation and asked the government to arrest it. Those present in the meeting included former Reserve Bank of India deputy governor Rakesh Mohan, former chief economic advisor Shankar Acharya, NCAER director-general Shekhar Shah, former NITI Aayog vice-chairman Arvind Panagariya, former Monetary Policy Committee member Ravindra Dholakia, former New Development Bank chairman K V Kamath, economic advisory council to the prime minister chairman Bibek Debroy, according to sources.