In the last few years, the Centre may have focused on controlling the fiscal deficit, but Amitabh Kant, the former CEO of Niti Aayog, is concerned over the high fiscal deficit at the state level and has called for greater fiscal discipline by states.
“The Centre has controlled fiscal deficit. But the Centre and states together still have a high fiscal deficit. So there is a need for greater financial discipline by the state governments as well,” said Kant at the 14th Morningstar Investment Conference.
According to a recent study by the National Stock Exchange, the overall deficit for 21 states it studied, surpassed the budget estimates by 30 bps to 3.5 per cent of GSDP (gross state domestic product) last financial year. For FY25, the fiscal deficit is estimated to be lower at 3.2 per cent of GSDP, but still exceeding the 3 per cent recommended by the 15th Finance Commission.
Kant was not too supportive of redistributing funds among people. Rather he felt governments should focus on spending more on capital expenditure. “You need a huge focus on production and productivity. And that will happen with more money being put into these aspects of growth,” he said.
He noted that many countries like America and even countries in Europe had grown over the years through capital expenditure spending.
India is among the fastest-growing major economies in the world. Kant noted that India had moved from a ‘fragile 5’ economy to among the top five on the back of major structural reforms and infra development. While it is expected to continue growing, there are challenges ahead.
“India is confronted with three critical challenges like the geo-political conflict, breakdown of global supply chain, and emergence of new technologies like AI (artificial intelligence) and ML (machine learning), which are going to impact production, radically transform lives of citizens across the world. The challenge is that India has to confront these challenges and irrespective of these challenges, India has to grow,” said Kant.
According to him, 500 million people will move from rural to urban areas and therefore there was a need for sustainable urbanisation.
He also said India had to create more jobs and therefore manufacturing would be extremely critical. India has to grow its share of manufacturing to 25 per cent from the current 17.5 per cent, he added.
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