Take the pledge to vote

For a better tommorow#AajSawaroApnaKal
  • I agree to receive emails from News18

  • I promise to vote in this year's elections no matter what the odds are.
  • Please check above checkbox.

    SUBMIT

Thank you for
taking the pledge

Vote responsibly as each vote counts
and makes a diffrence

Disclaimer:

Issued in public interest by HDFC Life. HDFC Life Insurance Company Limited (Formerly HDFC Standard Life Insurance Company Limited) (“HDFC Life”). CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101 . The name/letters "HDFC" in the name/logo of the company belongs to Housing Development Finance Corporation Limited ("HDFC Limited") and is used by HDFC Life under an agreement entered into with HDFC Limited. ARN EU/04/19/13618
LIVE TV DownloadNews18 App
News18 English
News18 » Business
4-min read

Waiving Agricultural Loans Could Cost 2% of India's GDP, Says Chief Economic Advisor

Chief Economic Advisor Arvind Subramanian has expressed concern over the recent waiving of farmers' loans by state governments in India, saying it could increase the deficit by two per cent of the GDP if the practice is carried out nationwide.

PTI

Updated:April 25, 2017, 9:48 AM IST
facebookTwitterskypewhatsapp
Waiving Agricultural Loans Could Cost 2% of India's GDP, Says Chief Economic Advisor
Chief economic adviser at India's Finance Ministry, Arvind Subramanian. (Reuters)

Washington: Chief Economic Advisor Arvind Subramanian has expressed concern over the recent waiving of farmers' loans by state governments in India, saying it could increase the deficit by two per cent of the GDP if the practice is carried out nationwide.

"We've had a spate of announcements recently about agricultural loans being waived off. You know these could cost, if it were to spread, these could cost something like two per cent of GDP, adding to the deficit," Subramanian told an audience in Washington last week.

"If these things spreads as is possible. So I think that's a kind of big challenge," he said in an apparent disagreement of the recent move by Uttar Pradesh Chief Minister Yogi Adityanath to waive agricultural loans worth Rs 36,000 crore in the state.

In an interactive session at the prestigious Peterson Institute in Washington last week on the sidelines of the annual Spring meeting of the International Monetary Fund and the World Bank, Subramanian said actions like this pose a big challenge to the Centre's effort towards fiscal consolidation.

If the Centre achieves success, the state undoes that, he rued.

The government is grappling with the challenge of how to waive the debt of the private sector, which is a political issue now, he said.

"There are lots of discussions on how to deal with this. But I think at the heart of the difficulty is it's very simple. How does a political system in which concerns about you know cronyism, crony capitalism are so strong? How does that system, how is it able to forgive -- is the public sector tax payer on the hook and forgive private sector debts.

"I think that's the heart of the political problem and we are still kind of grappling with how to do that," Subramanian said.

Talking about the Centre's ambitious Goods and Services Tax (GST), he said it is a major development in India.

"It's the most ambitious tax reform. It is something that is simply inconceivable in the United States. It's just simply inconceivable, not just because it's a value added tax which you know people here on the left and right hate, but also because it's actually a tax that has to be coordinated between the Centre and the States," he asserted.

Noting that the GST will bring a uniform taxation system across the country, Subramanian said the benefits are going to be quite substantial.

"Firstly creating common market in India by eliminating barriers between states. Also the big benefit is kind of the compliance benefits that I envisage will happen," he said.

Responding to a question, Subramanian said the GST is going to be revenue neutral and it is unlikely to increase the prices of commodities.

He also talked about the increase in the US Federal reserve rates and said India is unlikely to be effected much by it.

"I worry less this time around for at least for India," he added.

"India was affected last time because then oil prices were very high, inflation was double digit, fiscal deficit was getting out of control and reserves were low. I also worry less about India is because our corporate sector then had a lot of foreign currency denominated borrowing this time around it's kind of much less. So interest rates go up, capital flows or exchange rates come down and you have these balance sheet effects," he said.

"That I think India is relatively a better cushioned against. But as far as other emerging markets concerned I just follow what the IMF says and they're always saying you know lots of foreign currency in other markets. India I think is relatively well cushioned on that," he added.

Responding to a question on Prime Minister Narendra Modi's 'Make in India' scheme, Subramanian said it is an attempt to make up for missing the bus in the manufacturing sector decades ago, in which China has now taken the lead.

"...We missed the manufacturing work long ago. But what we need to do on services is to make sure that we don't reach the Lewis turning point in services for another 25-30 years. China's Lewis turning point it turned after about 25-30 years of manufacturing. Can we do the same thing in services and that means you know just increasing the supply of you know medium skilled labor, the IT sector across the board I think that's what we need to do," the CEA said.

Get the best of News18 delivered to your inbox - subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what's happening in the world around you – in real time.

| Edited by: Huma Tabassum
Read full article
Next Story
Next Story

Also Watch

facebookTwitterskypewhatsapp
Most Active
Company Price Change %Gain
IRCTC 727.75 127.42
Infosys 786.10 -3.52
Yes Bank 40.10 1.26
Tata Motors 127.85 5.40
Indiabulls Hsg 197.80 -5.76
Company Price Change %Gain
Fortis Health 130.55 -5.36
IRCTC 728.60 127.69
Indiabulls Hsg 197.90 -5.74
Yes Bank 40.00 1.01
Tata Motors 127.80 5.32
Top Gainers
Company Price Change %Gain
Tata Motors 127.85 5.40
ONGC 135.25 4.84
Bharti Airtel 393.55 2.78
UltraTechCement 4,170.30 2.28
IndusInd Bank 1,250.60 2.24
Company Price Change %Gain
Tata Motors 127.80 5.32
ONGC 135.20 4.73
Bharti Airtel 393.50 2.84
IndusInd Bank 1,250.50 2.23
Sun Pharma 394.60 2.15
Top Losers
Company Price Change %Gain
Infosys 786.10 -3.52
Bajaj Finance 3,883.30 -2.26
Power Grid Corp 198.40 -1.29
Bajaj Finserv 8,082.25 -1.07
UPL 586.65 -0.54
Company Price Change %Gain
Infosys 785.65 -3.68
Bajaj Finance 3,881.65 -2.37
Power Grid Corp 198.45 -1.27
Larsen 1,422.65 -0.34
Kotak Mahindra 1,583.75 -0.27

Live TV

Countdown To Elections Results
To Assembly Elections 2018 Results