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IMF for setting up of independent fiscal council

Last Updated 16 October 2017, 18:57 IST

The International Monetary Fund (IMF) has suggested India to consider setting up an independent fiscal council, saying this institution has contributed to better outcomes in the countries where it has been introduced.

“India is engaging in very gradual fiscal consolidation which we regard as a welcome move,” Vitor Gaspar, Director of IMF’s Fiscal Affairs Department, told PTI in an interview.

“India has accepted a public debt anchor at 60% of GDP. We think that is appropriate. And that’s something that will help India establish its public debt as a safe asset,” he said.

Of the view that further progress can be made, Gaspar said India could further strengthen its fiscal institutions both at the level of the union and at the level of states.

“In the context of strengthening the fiscal responsibility frameworks, perhaps India could consider setting up an independent fiscal council,” he suggested.

This is because the IMF has seen from the experience in other nations that this helps both in terms of transparency and accountability towards the general public, and also in terms of the quality of the policy debate in the country itself, he added.

“By and large, when it comes to fiscal discipline, we regard the recent steps as steps in the right direction,” Gaspar said, adding that the issue of an independent fiscal council has been raised with India in the context of Article IV consultations.

“I would assume that the main point that was made from our side is that some countries have introduced independent fiscal councils and in these countries, there is tentative evidence that this has contributed to better outcomes,” he said in the interview last week.

Describing introduction of Goods and Services Tax (GST) as of macroeconomic significance, Gaspar said this is a major change. GST promises to create a single market in India, to integrate India much further and therefore, from a medium to long-term perspective, it is something which is growth friendly, he said.

“The only qualification that we would have is that we would have preferred to see a simpler system in place and perhaps over time the structure of rates could be simplified further and the tax base could be widened,” he said. Since the GST has been introduced on July 1, there will be a steep learning curve concerning how it is functioning and it’s from that learning experience that the solutions will emerge, he noted.

There is no way of giving detailed advice without looking at the hard data and the experience that is being accumulated in India, the IMF official said.

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(Published 16 October 2017, 18:57 IST)

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