Urging Finance Minister P Chidambaram to continue with tax reforms and fiscal consolidation, eminent economists Friday identified removal of tax exemptions as critical for generating additional resources.
In a pre-Budget meeting with the finance minister, they also stressed the need to increase allocation for improving the quality of education and improving infrastructure in rural areas.
Removal of exemptions on software exports, the small-scale sector and special category states were some of the areas mentioned by the economists.
Initiating the discussion, Chidambaram said employment generation and creation of infrastructure for providing services in rural areas were the biggest challenges next fiscal.
ICRA's Chief Economist Saumitra Choudhuri said, "We need to continue fiscal consolidation, both at the Centre and in states. Exemption should be kept under control, while customs duty be reduced in a phased manner."
Nagesh Kumar, director general of Research and Information System of Developing Countries, said the Budget should provide strategic direction for making India a manufacturing hub.
"We should also move to providing subsidies to research and development as is done by the developed world."
Suman Bery, director-general of National Council of Applied Economic Research, said since Budgets of state governments and the Centre were constrained, economic activities should be deregulated for boosting employment.
Non-farm employment should be generated in rural areas by deregulating economic activities to ensure participation of small units.
The economists suggested a new regulatory architecture for higher education, to remove entry barriers, and enhance quality of education and improve access of disadvantaged groups to such education.
Other suggestions in this context included changing the rules governing "not for profit" educational institutions for encouraging greater involvement of private enterprise in higher education and introduction of an "inheritance tax" with tax concessions for philanthropic contributions to educational institutions on the lines prevailing in the US.
Autonomy measures for unlocking the productive potential of public sector banks, expansion of rural non-farm activities in the overall policy thrust on rural development, and rationalisation and simplification of expenditure planning in government departments were some of the other suggestions made at the meeting.
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