India should take credible steps to return to the path of fiscal rectitude once the COVID pandemic is over, 15th Finance Commission Chairman N K Singh said on Monday.
Stating that the country's current debt profile is neither worrisome nor comforting, he said people have to be mindful of the debt situation while seeking more fiscal stimulus.
To mitigate the impact of the pandemic on the economy, the government and the RBI came out with a series of packages totalling around Rs 30 lakh crore, or 15 per cent of the GDP.
Speaking at the CSEP-World Bank Seminar on fiscal governance, Singh said, "If you look at the total fiscal stimulus of the... government which is upwards of 12-13 per cent, when some people advocate greater fiscal stimulus, I think we need to be careful." "Also, we need to be mindful that if you look at the general debt programme, the debt profile is not worrisome but it does not give you comfort. Therefore, this issue of the timing of the next steps in fiscal policies is an issue which is somewhat debatable," he noted.
The gross borrowing from the market for the current fiscal would be around Rs 12 lakh crore. The Budget has pegged fiscal deficit at 6.8 per cent for this fiscal, down from 9.5 per cent of the GDP in the last financial year.
High debt-to-GDP ratio of around 90 per cent has been flagged by various rating agencies.
Highlighting that this might not be the right time to talk about fiscal tightening, Singh said "but I think it is recognised that once the pandemic is behind us, we certainly will need to have credible steps to return to the path of greater fiscal rectitude. Are we preparing ourselves adequately?" India's fiscal deficit in 2020-21 fiscal stood at 9.3 per cent of GDP, 0.2 per cent lower than the revised estimate of 9.5 per cent. The Budget 2020-21, presented before the COVID-19 lockdowns, had set a fiscal deficit target of 3.5 per cent of GDP.
As per the glide path for fiscal consolidation announced in Budget 2021-22, the government plans to bring down the fiscal deficit to 4.5 per cent of gross domestic product (GDP) by 2025-26 fiscal.
