New Delhi, Feb 10 (IANS): The government, which announced higher spending in key sectors to propel economic growth after a COVID-triggered contraction, intends to return to its original fiscal deficit path in three years, Sanjeev Sanyal, Principal Economic Advisor to the Finance Ministry, said on Wednesday.

Addressing a webinar organised by the Public Affairs Forum of India (PAFI) on Budget 2021, Sanyal pointed out that there was no option than to opt for a higher fiscal deficit burden -- 9.5 per cent in 2020-21 and 6.8 per cent for 2021-22 -- to kick start the economy.

"We will be back to our identified fiscal deficit path in three years," he said, adding that there would be significant increase in expenditure on infrastructure as the underlying idea was to create demand by generating jobs and provide supply-side capabilities simultaneously."

Presenting the budget 2021-22 proposals in Parliament on February 1, Finance Minister Nirmala Sitharaman had said that despite the high fiscal deficit in the current and next financial years, the government plans to continue on the path of fiscal consolidation, and intends to reach a fiscal deficit level below 4.5 per cent of the GDP by 2025-2026 with a fairly steady decline over the period.

Outlining India's strategy of hedging for the worst in tackling both the health and economic impact of the pandemic, which helped the country deal with them in a successful manner leading to most of the short-term indicators showing strong demand revival, Sanyal said that the government has utilised the Budget to react to the need of pushing the demand further. He added that the government has decided to use resources to push infrastructure.

"It would mean higher debt, but we must leave behind some assets for future generation. Infrastructure will create demand and jobs," he said.

Sanyal also said that it was necessary to unlock the resources locked up in the public sector through disinvestment, and the government was not shy of privatisation.

"Current political leadership is willing to walk the talk on disinvestment and privatisation," he said, adding that the post-COVID world will be completely different and supply side reforms would be critical. The new labour reforms and farm laws were steps in that direction.

While there may be some necessary smoothening, Sanyal said, "Overall, we remain committed to the implementation of farm laws. Competition is the best way to induce better services."

According to Sanyal, Atmanirbhar Bharat was not a return to pre-1991 import substitution.

"We intend to be part of global supply-chain. We remain a part of the world. We are not retreating behind the import tariff walls," he stressed.

Sanyal said that the government's Production Linked Incentive (PLI) scheme was about creating clusters in India and not a call for protectionism.