India should reduce its debt within 5-6 years by putting fiscal policy on the right path, but "draconian changes" are not the answer, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Thursday.
"In the next five or six years, the objective should be to bring the gross debt to GDP ratio down that means fiscal deficit also must go down," he said, adding for this revenues must go up and there should be decrease in subsidies.
"Draconian changes are not at all the answer. A very large number of balls have to be balanced in an effort to put fiscal policy in right path", he said, delivering the first Dr Raja J Chelliah lecture organised by Madras School of Economics and Southern India Chamber of Commerce and Industry.
Noting that a fiscal policy must be directed towards higher level of economic efficiency, he said: "Fiscal policy must be designed to promote growth. (It is) particularly important for a low income countries like us. In our case, trying to design fiscal policy, we need to look what is the implication of fiscal policy and the growth of an economy."
Stating that fiscal policy was about making sure that different groups get a fare share of opportunities, he said: "India being a Federal structure, distribution is not just an individual's context, but it is also a distribution of revenues between the Centre and States, States to lower level bodies and others".
One of the objectives of fiscal policy was to stabilise the economy on how to react to "shocks" (whenever a slowdown occurs) both external and internal, he said.
Later talking to reporters, Ahluwalia said inflation was a problem but added 2014 would be a better year.
"Inflation is a problem. We will see a softening of inflation. If you look at the data, it suggests that there will be softening of inflation. I cannot judge how quickly it will often, but it will soften," he said.
On Tamil Nadu chief minister J Jayalalithaa's charge that the Centre was not allocating more funds to Tamil Nadu, he said, "I would not comment on state issues. She has not written to me on this matter." On the Goods and Services Tax, he said "Most of the parties, I think, are coming closer. So, obviously it requires a Constitutional amendment. It will require going to the next Government (for passage)".
"I can assure you that if you are able to say that GST is now a reality, it will be the best signal globally that India is open for business and serious about it," he said.