The MNREGA has lost its original purpose and can be subsumed within the Food Security Bill (FSB), says Indranil Pan, economist, Kotak Securities.
Pan says MNREGA has a 'demand-driven structure' that is modeled on a 'Keynesian' model of development for income generation. He believes that once MNREGA is brought under the Food Security Bill, those employed can be used to create infrastructure for the FSB, he says.
That will enhance the productivity in the agricultural sphere and reduce India's reliance on global sources of food. In any case, with global food inventories falling, India needs to undertake agricultural reforms since it is not possible for the country to 'import' its way out of the problem.
According to Pan, the priorities for the government while preparing Budget 2012 should be to start looking at the whole situation in a multi-dimensional way and not take growth for granted.
Given the alarming fiscal deficit, he thinks it is important for the government to consider the structural aspects of the fiscal deficit, such as taxation of the services sector.
The services sector accounts for 60 percent of the country's GDP but makes a very limited contribution to taxes. That needs to change and the government needs to reduce its dependence on the manufacturing sector for taxes.
The Budget must also provide a credible roadmap on fiscal consolidation, says Pan, as well asoffer a strategy on foreign direct investments in various areas, such as multi-brand retail and insurance.
In an attempt to raise government revenues, there could be an attempt to deregulate diesel prices and increase LPG (cooking fuel) prices. While freeing diesel prices could result in short-term inflation pain, it will ultimately lead to improved allocation of resources, Pan says.
He also thought the problems of the power, coal and gas sectors need to be considered collectively. In fact, if fertiliser and diesel prices are even partially deregulated, minimum support prices for farmers will also have to increase.
Given the government has very little leeway by way of providing fiscal stimulus, expect growth to pick up slowly.
He estimates gross domestic product at 6.7 percent in the current financial year ending March 2012 and at 6.6 percent the next year.
Watch the whole Firstpost interview here.
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Updated Date: Jan 21, 2015 12:02:51 IST