Creating Fiscal Space Crucial for Sustaining Economic Growth, Kovind Highlights

Former President Ram Nath Kovind emphasized the significance of creating adequate fiscal space to sustain India's growth momentum during an event organized by TIOL. Highlighting the importance of a predictable and certain tax architecture, Kovind pointed out that no nation could thrive without it. He stressed that sound fiscal management is crucial for attracting both public and private capital, thereby enhancing the quality of public-private partnerships.

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Kovind noted the substantial progress India has made in streamlining its taxation policy, leading to a simplified tax regime. The introduction of fewer tax slabs and streamlined processes has not only made the taxation policy more predictable but also boosted investor confidence and improved the ease of doing business. He further mentioned that leveraging technology has played a pivotal role in these advancements, with faceless tax assessment set to become the norm.

At the same event, former Finance Commission Chairman N.K. Singh discussed the interconnection between fiscal deficit, revenue buoyancy, and economic growth. Singh highlighted that investor decisions, influenced by rating agencies, focus on government debt encompassing both state and central levels. He pointed out that the global average debt is now nearing 100 per cent post-pandemic and is expected to remain high for a significant portion of the world.

Singh also touched upon the evolution of fiscal deficit philosophy in India, tracing it back to the adoption of the Sukhamoy Chakravarty Report in 1982. This report recommended using fiscal deficit as a measure for reporting, marking a shift from previous practices. He mentioned that periods of fiscal extravagance often led India to seek support from multilateral and bilateral entities. Additionally, Singh remarked on the challenges posed by opting to inflate debt in other countries, which resulted in serious growth consequences.

The discussions by Kovind and Singh shed light on the intricate relationship between fiscal policies, taxation reforms, and economic growth. Their insights underline the necessity for sound fiscal management and tax reforms to maintain India's growth trajectory and navigate the complexities of global economic pressures.