New Delhi: A policy meeting of the Niti Aayog led by Arvind Panagariya in New Delhi has suggested Prime Minister Narendra Modi to increase public spending. The meeting held under the aegis of several other economists also asked to change the financial road map of the government.
The idea that public spending needs to be increased had been mooted by chief economic advisor Arvind Subramanian in the mid-year review of the economy released in December. He told that burden on private sector already is in a position to invest, so the government needs to step up. As its budget time, government policy on the front of such suggestions can be confusing.
Addressing a seminar on Friday through video conferencing, Finance Ministry, Arun Jaitely said, "The whole concept of spending beyond your means and leaving the next generation in debt to repay what we are overspending today is never a prudent fiscal policy".
This didn't mean that the government would neglect development spending but would seek to innovate. "We will now have to enter a new age where all models of financing... infrastructure will have to be explored. A particular model can be created," Jaitley said.
In a statement from the Prime Minister's Office has noted that the policy of the Commission to establish an objective mechanism is a dynamic Institutional leading out of the public system to contribute to the policy making.
The latest data showed fixed capital formation rose only 3% in FY14 after contracting 0.3% in the year before. The argument against fiscal expansion is that credit-rating agencies would take a negative view of this and it could also delay monetary easing.
Apart from Panagariya, the Friday meeting was attended by two full-time Niti Aayog members, Bibek Debroy and VK Saraswat, and its CEO Sindhushre Khullar. Also present were Jaitley, planning Minister Rao Inderjit Singh, chief economic advisor Subramanian and cabinet secretary Ajit Seth.
Other attendees included Vijay Kelkar, Nitin Desai, Bimal Jalan, Rajiv Lall, R Vaidyanathan, Subir Gokaran, Parthasarathi Shome, P Balakrishnan, Rajiv Kumar, Ashok Gulati, Mukesh Bhutani and GN Bajpai. "Niti Aayog had today organised a meeting with some very eminent economists with regard to the state of economy and steps required to boost investment, growth and even specific suggestions with regard to the Union Budget," Jaitley told reporters after the meet.
In a statement release after meeting emphasized that economists are concentrating on High government growth, Predictable tax regime, financial prudence and fast work on infrastructure development.