Bibek Debroy, Chairman, Economic Advisory Council to the Prime Minister with members Ratan P Watal and Rathin Roy during a press conference in New Delhi on Wednesday. (Photographer: Subhav Shukla/PTI)

Modi's Advisory Panel Says India Must Stick to Fiscal Goal

(Bloomberg) -- Prime Minister Narendra Modi’s economic advisers warned against any relaxation in the budget deficit goal as pressure builds on the government to boost spending and revive growth.

"There is a consensus that the fiscal consolidation exercise shouldn’t be deviated from," Bibek Debroy, chairman of the prime minister’s economic advisory council, said Wednesday after its first meeting in New Delhi.

Modi faces the challenge of narrowing one of Asia’s widest budget deficits while reviving an economy that slowed in the June quarter to a level last seen in 2014. The International Monetary Fund lowered India’s 2017 gross domestic product forecast by 0.5 percentage points to 6.7 percent on Tuesday.

India’s goal is to curb its budget deficit to a 10-year low of 3.2 percent of gross domestic product in the year ending March, however large government spending to bolster growth could put this target in doubt and risk a cut in sovereign ratings. The South Asian nation lost the tag of Asia’s fastest growing economy to China after the withdrawal of high value currency notes and a chaotic roll out of the national sales tax.

The panel of experts advising Modi has shortlisted 10 issues including economic growth, fiscal framework, job growth and monetary policy to work on. It will focus on critical interventions related to accelerating activity and employment over the next few months, it said in a statement.