Union Finance Secretary T.V. Somanathan on Saturday stressed the need for fiscal discipline to make the economy stronger and suggested reforming poorly targeted subsidies such as those provided for electricity and fertilisers in order to improve the quality of public expenditure.
“First and foremost, State and Central governments need prudent and conservative fiscal policies, this is absolutely critical, if we have to stay afloat and do well,” Mr. Somanathan said delivering the XVI CUB V. Narayanan Memorial Lecture on ‘India in the emerging global economic architecture’.
He also emphasised the importance of reducing the fiscal deficit, particularly at the central level, minimising external debt as well as fostering a strong domestic investment climate.
“We need to improve the quality of our public expenditure, with greater share for those aspects of public expenditure which help to promote growth. To do this, we have to reform poorly targeted subsidies such as those in electricity and fertilisers, without which we can’t improve the quality of public expenditure. There are no quick fixes and quick lunches. It needs to be done. It calls for introspection,” he said.
Asserting that if India continues to grow at 6% to 7% a year it would be way ahead of many countries globally, Mr. Somanathan said, “We have to only ensure that we don’t do anything bad. We will improve, because others are worsening. We have the opportunity to shape the emerging architecture.”
“If India wants to truly play a significant role in shaping the emerging global economy, the most important challenge lies on the domestic front. We can’t shape the global order, if we do not have a strong domestic economy,” he said.
Presenting a bright future, he said there were some early signs of a potential role in new and emerging architecture such as international solar energy, which was going to be one of the key energy sources of the future. Importantly, the international alliance’s headquarters was in India, he noted.
Talking about India’s leadership in developing world class technologies such as the unique identity and unified payment interface (UPI), he said, “we are ahead of developed countries and not developing countries; a lot of developed countries are being advised on unique identity by UIDAI”.
He also referred to the ongoing balance of payment crisis in Sri Lanka and said it pointed to the declining role of the International Monetary Fund.
“As of today, the role of two countries China and India in Sri Lanka’s economic crisis and its resolution has been greater than [that of the] IMF. It may change. The situation is that multilateral institutions that were the pillars of the 1944 order are now not driving the change. It is a change and it is seen visibly,” he said.
In conclusion he said for India to become a global economic power it needed to emulate Singapore and Dubai on the ease of doing business, pursue scientific and technological innovations like the U.S., adopt the quality focus and work ethic of the Japanese, aim to match the manufacturing prowess of the Germans and work to ensure the quality of life of the Scandinavians.
