The path to fiscal consolidation should be assessed by looking at the consolidated finances of Centre and State, India’s Chief Economic Adviser Arvind Subramanian said.
He said that an assessment of 17 State budgets along with centre showed a decline in two metrics — fiscal deficit and revenue deficit.The capital expenditure is going to go up in centre, but when it is combined with the states, the increase is almost 0.5 per cent, from 4.6 to 5.1 per cent. “For me, this is a kind of Eureka moment. If you look at centre and state finances as a whole it will give better quality of fiscal consolidation, because revenue expenditure and defecit are coming down and you get desire towards shifting to capital expenditure.”
Mr. Subramanian was speaking at an interactive session on the Economic Survey 2014-15 at Madras School of Economics. He also said the ray of hope for India came from the acceptance to 14th Finance Commission recommendation on giving more funds to the states, which was a ‘watershed’ departure from an order of centralised decision-making and directives on investments. He said it would spur more competition among States in terms of governance and attracting investments. “Recently, I heard a car company moved out of Tamil Nadu to Gujarat because the state had not sorted out its power problem. Not sure if it is true,” he added.
