Supporting Finance Minister Arun Jaitley’s decision to stick to the path of fiscal consolidation, the International Monetary Fund said that the government should consider increasing the taxpayer base to help lower the deficit to 3 per cent of the GDP by 2017-18.
“We are very pleased that the government has stuck to the fiscal deficit plan. We expect the government to continue on the path and bring down the deficit to three per cent as targeted,” said Thomas Richardson, Senior Resident Representative (India, Nepal and Bhutan), IMF.
Jaitley, in the Union Budget, had decided to lower the fiscal deficit to 3.5 per cent in 2016-17 from 3.9 per cent in the current fiscal, despite suggestions to relax the deficit goalposts for another year in order to boost growth.
But, Richardson said the general government deficit is close to seven percent, which is on the high side by international standards.
Recognising the challenge from the higher payout for salaries and pensions due to the recommendation of the Seventh Pay Commission report, he also advocated widening the taxpayer base through measures such as use of technology as well as Aadhaar to track down non-filers and tax defaulters.
“The number of direct taxpayers in India is still very low at about 42 million. The recent report of the Tax Administration Reform Commission had suggested raising the base to about 60 million taxpayers,” he said, adding that on the indirect side, more taxpayers would be added once the goods and services tax is implemented.
Richardson also said the IMF would undertake a financial sector assessment of India, next year, which is a requirement for all G-20 countries.
Stressed assets of banksLauding the measures by the government and the Reserve Bank of India to implement “payment discipline”, Richardson said that “the levers at the disposal of banks and creditors to are not where they should be”.
Richardson said the Bankruptcy Code would be an important tool for banks to ensure loan repayments.