There is a lot of scope in India for reducing ‘untargeted’ food and fertilizer subsidies and enhancing revenue administration, the International Monetary Fund (IMF) has said.
“When one looks at some of the populist proposals announced by political parties during this election season, the important thing is to look at the benefits but also look at the costs and to look at the details,” Paolo Mauro, Deputy Director, the IMF’s Fiscal Affairs Department, told reporters at a news conference here on Wednesday.
“Certainly, when one looks at the case of India, there is a lot of scope for reducing untargeted food and fertilizer subsidies, and for enhancing revenue administration, including for the GST, which was a transformational positive reform. But, again, even there, improved tax compliance would be a priority, Mauro said.
Responding to a question on announcements made by political parties during this election season, Mauro said in India’s case, the priority continues to be gradual fiscal consolidation because the gross general government to Gross Domestic Product (GDP) ratio is at about 70 per cent.
“You also have a very rapid growth rate. The economy is growing in excess of 7 per cent, and the objective there is to make sure that that growth is inclusive and it filters down to poverty reduction,” he said.
“On the schemes, therefore, ultimately what matters is the combined distributional impact of the transfer policies and also of the taxes that would finance them. So, one has to look at the whole package together to assess the distributional impact,” Mauro said.