PMEAC suggests cutting of govt. expenditure and tight monetary policy; the rupee is well corrected.

The Prime Ministers’ Economic Advisory Council has made some tough measures on different fronts to stabilize the economy. In its report titled ‘Economic Outlook 2013-14’, the Rangarajan chaired Council has warned about the possibility of fiscal slippage and hence the government should cut some of its planned expenditure to contain the fiscal deficit.

The PMEAC is a powerful body representing government’s stand on economic issues.

The Council has downwardly revised the targeted growth rate for the year at 5.3 per cent, which is interestingly lower than the traditionally conservative RBI’s estimate of 5.5 percent.

The Council estimated Industrial sector growth rate at 2.7 %, lower than the agricultural growth rate of 4.8 percent. Interestingly, the industrial sector will be the lowest performer among three sectors.

The most important part of the PMEAC report is on the fiscal front. The panel bells alarm onfiscal deficit as the government has used and thus exhausted 62.8 percent of its borrowing targets in the first four months of the financial year. Subsidy expenditure during the first four months was 51.3 per cent of the stipulated amount.

It also advocated the continuation of the present tight monetary policy to contain inflation. Similarly on the rupee front, the Council has observed that the rupee at the current level is well corrected. The Council has advocated a number of measures to improve the current account position including export promotion. 

Tags : pmeac on economic situation suggestions