Ex-Finance Secy Subhash Chandra Garg refutes parallel between India, Srilankan economy
The ongoing economic crisis in Sri Lanka and Nepal are emblematic of the wrong policies undertaken by the government at the helm of both the countries. However, some economists and experts have drawn a parallel between the weak fundamentals of Indian economy and the current economic condition of Nepal and Sri Lanka. Some people went on to add that these weak fundamentals of the Indian economy can flare into a full blown economic crisis in the future. But Subhash Chandra Garg, former finance secretary refutes these claims and said no parallel exists between India and Sri Lanka as far as the economic situation is concerned.
"I don't think there is any parallel between Sri Lankan crisis and any crisis which India might face. Sri Lanka, for last many years, has been following a very unwise policy of over-borrowing from abroad without having the ability to service debt. So, that is one reason, second reason that Lankans have been very pathetic in taxation, so they have not been able to raise taxes. They have also been overly generous in their expenditure programmes," Garg said.
According to him, everything which can go wrong was going wrong in this Sri Lankan policy framework for the last 7-10 years. He attributes these to factors like poor taxation policies, excessive expenditure and very unwise foreign borrowing, including the borrowing from the Chinese, as the reasons for this economic crisis.
He went to explain that India's tax to GDP ratio is a bit low and our expenditure management has not been that outrageously liberal or unwise.
"We have not borrowed excessively abroad; in fact, we have under-borrowed abroad and what we own, most of that is domestic. Also, we have very large foreign reserves, which in fact, we add more to the cost to the government, rather than being underfunded," Garg said.