The International Monetary Fund (IMF) has said that there is a lot of scope in India for reducing ‘untargeted’ food and fertilizer subsidies and enhancing revenue administration.
Paolo Mauro, Deputy Director, the IMF’s Fiscal Affairs Department stated that when looking at some of the populist proposals announced by political parties during the election season, the important thing is to look at the benefits but also look at the costs and the details.In case of India there is a lot of scope for reducing ‘untargeted’ food and fertilizer subsidies and enhancing revenue administration including for the GST. He added that for India, the priority continues to be gradual fiscal consolidation because the gross general government to Gross Domestic Product (GDP) ratio is at about 70 per cent. The economy is growing in excess of 7 per cent, and the objective is to make sure that that growth is inclusive and it filters down to poverty reduction.
He further stated that ultimately what matters is the combined distributional impact of the transfer policies and also of the taxes that would finance them and that one has to look at the whole package together to assess the distributional impact.
