Govt failed to reduce deficit, says Rangarajan

The fiscal deficit can be contained at a reasonable level only by widening the tax base and limiting expenditures including subsidies, he said. “In a developing economy like India, subsidies are an essential component of government expenditures. However, they need to be targetted appropriately so that they accrue only to the low income household,†Rangarajan said.

Outlining the other areas of concern, Rangarajan said the growing disparities in income among states had become more pronounced after liberalisation. In the pre-liberal days, he said “the difference between the highest and the lowest growth rates was 40 per cent, which has now increased to over 70 per cent.â€He said many states have not been party to Centre’s liberalisation process. “If the regional disparities have grown, it is also reflection of the quality of governance.†Enough attention has also not been paid by the Centre to sectors like agriculture and social infrastructure, he said. Criticising the government’s slow pace of financial sector reforms, he said “Capital account liberalisation is not a discrete event … It can be done in stages.â€