'Centre should focus on free-spending policies than balancing deficit, budget'

KOLKATA: Stating that the Central government was more concerned about balancing the deficit and the Budget, Nobel laureate economist Abhijit Vinayak Banerjee on Thursday said the former should not have opted for revenue generation by increasing Cess as other forms of tax collections were not keeping pace at a time when the country's economy slowed down due to the ongoing pandemic.

The economist suggested that the Centre should rather focus more on "free-spending policies" like other economies of Europe and the US.

Replying to a question in relation to Centre's move of increasing Cess to 16 per cent from what was 5 per cent in 2014, the Nobel laureate, who heads West Bengal's Global Advisory Board (GAB), said: "The government has a fiscal problem and it may have more faith in balancing the budget. I have always been in favour of more free spending policies. I think it (increasing Cess) is a symptom of the same. The government is trying to use the one instrument it has when other forms of tax collections are not necessarily keeping pace as the economy is slowing down."

"It (the Centre) is using the same as a way to balance the Budget. I do feel the direction should not have been taken as it is normal to be 'open handed' with the spending," he said. Referring to the policies taken up in the western world to tackle the economy, he said: "The Central government is too unwilling to do what the US and European governments are doing, that is printing money and spending it. I think that would have been a better policy in the current context."

In connection with abnormal hikes in fuel prices, Banerjee said: "We are not even avoiding inflation that is driving fuel prices up."

"The inflation is already up due to the high fuel prices. I think there is a good case for being more open-handed," he added.

It needs a mention that Chief Minister Mamata Banerjee had also earlier alleged that the states were deprived as the Centre increased the Cess to 16 per cent.

The reason being states do not get any share if Cess and surcharges, levied instead of taxes. In a bid to ensure further development of the social sector to boost the state's macro economy, the Mamata Banerjee government has proposed a "people centric" state Budget of Rs 3.08 lakh crore for 2021-22 fiscal with prime focus on the same.