‘Govt Com­mit­ted to Fis­cal Pru­dence, No Give­aways Bor­der­ing on Pop­ulism’

The bud­get is strong on re­forms, built on strong macroe­co­nomic pa­ram­e­ters and is also strong with re­gard to fis­cal num­bers

The Economic Times - - Economy: Macro, Micro & More -

Eco­nomic af­fairs sec­re­tary Shak­tikanta Das, one of the key ar­chi­tects of the bud­get, said in an in­ter­view with ET’s Deepshikha Sikar­war and Vi­nay Pandey that the gov­ern­ment is com­mit­ted to fis­cal pru­dence and that he ex­pects in­ter­est rates to de­cline. Edited ex­cerpts:

There was a strong an­tic­i­pa­tion of give­aways af­ter de­mon­eti­sa­tion. You have re­sisted that… The gov­ern­ment was and the gov­ern­ment is com­mit­ted to fis­cal pru­dence. So give­aways bor­der­ing on pop­ulism are some­thing which the gov­ern­ment does not be­lieve in. In­stead of giv­ing out doles, the gov­ern­ment be­lieves in spend­ing that money in pro­duc­tive sec­tors like in­fra­struc­ture, con­sist­ing of let’s say the rail­ways, the roads or ir­ri­ga­tion. Pro­duc­tive ex­pen­di­ture has a mul­ti­plier ef­fect to cre­ate more em­ploy­ment op­por­tu­nity and aug­ment growth. Once you give out a dole, it is one-time dole; it’s fin­ished; then what? If you have to pull peo­ple out of poverty, then you need to cre­ate pro­duc­tive as­sets, cre­ate an en­vi­ron­ment where there will be more job op­por­tu­ni­ties.

Do you think bud­get has set the stage for lower in­ter­est rates? A lot of money has come into the sys­tem. We are look­ing for­ward to a regime of low in­ter­est rates and suf­fi­cient liq­uid­ity in the bank­ing sys­tem thanks to de­mon­eti­sa­tion. And also now, gov­ern­ment’s open mar­ket bor­row­ing has been re­duced. If any­thing, I think in­ter­est rates will move south­wards. The bud­get is strong on re­forms, built on strong macroe­co­nomic pa­ram­e­ters and is also strong with re­gard to fis­cal num­bers.

You’ve de­vi­ated slightly from the fis­cal deficit path. Since there was con­sen­sus on a fis­cal boost, should you not have taken more space? I would not look at it as a de­vi­a­tion from the fis­cal deficit path. We have men­tioned the NK Singh com­mit­tee re­port. They say that debt sus­tain­abil­ity, that is 60% debt, should be the un­der­ly­ing an­chor. Based on that goal of 60% debt for gen­eral gov­ern­ment in 2023, they have said it should be 3% deficit for the first three years, that is next year on­wards. The debt to GDP for FY18 is 44.6 or 44.8% of GDP. Within this fis­cal deficit, in­stead of 3% for three years, we have done 3.2% and 3%. So we are mov­ing grad­u­ally in that di­rec­tion with a clear com­mit­ment that it will be 3% in 2018-19 and even dur­ing the cur­rent year it will be our en­deav­our to im­prove upon the fis­cal num­bers. We would like to im­prove on 3.2% — it all de­pends on what kind of rev­enues we get out of this huge amount of cash which has come into the sys­tem. The qual­ity of ex­pen­di­ture also has to be kept in mind. The im­ple­men­ta­tion, the ex­e­cu­tion of var­i­ous works, have im­proved over the last two, two and a half years. In roads, we have given one ex­am­ple, like per day the av­er­age was so much. This year, it is 133 km in PMGSY (Prad­han Mantri Gram Sadak Yo­jana). So pace of ex­e­cu­tion, pace of im­ple­men­ta­tion has im­proved, but that can­not be also ex­po­nen­tially mul­ti­plied in a sin­gle year. There is a cer­tain ca­pa­bil­ity to spend. So based on that, the al­lo­ca­tions have been made — what can be fruit­fully im­ple­mented in a man­ner that the qual­ity is not com­pro­mised.

Pri­vate in­vest­ment is yet to kick in. How will the bud­get help? When the econ­omy grows, nat­u­rally there should be more ap­petite for in­vest­ment. Last two years we have been main­tain­ing 7.2, 7.6% growth. This year, we will have to wait for the num­bers but next year the econ­omy will come back to nor­mal growth. The gov­ern­ment’s re­spon­si­bil­ity is to pro­vide an en­abling en­vi­ron­ment where pri­vate in­vestors can in­vest. The gov­ern­ment is con­tin­u­ously im­prov­ing the ease of do­ing busi­ness. The has­sle-free en­vi­ron­ment for in­dus­try, the abo­li­tion of FIPB (For­eign In­vest­ment Pro­mo­tion Board) it­self is a big step so that in­vest­ments take place faster. But many of the large com­pa­nies have their own prob­lem in terms of their own ear­lier bor­row­ing and the debt bur­den. Slowly many of them are com­ing out of that kind of bag­gage. Also the rail­ways’ ex­pen­di­ture, the spend­ing on high­ways should help. Cor­po­rate tax be­ing brought down to 25% for com­pa­nies with less than ₹ 50 crore turnover will im­prove their bal­ance sheet, leave them more sur­plus re­sources, which they should be in a po­si­tion to in­vest, mod­ernise, ex­pand ca­pac­ity. That should play a pos­i­tive role.

You have not bud­geted for any up­side in the rev­enue from the note-ban scheme. Will that come in be­fore the end of the fis­cal year? Nor­mally, peo­ple who come un­der the scheme, like the Garib Kalyan scheme, more than 90% do it on the last 10 days. So there­fore, what is go­ing to be the re­sponse we will know per­haps from March 15-20 on­wards. There­fore, very dif­fi­cult to es­ti­mate how much peo­ple are go­ing to de­clare. Then of course, based on the data which is avail­able af­ter this pe­riod is over, the depart­ment will ini­ti­ate ac­tion. De­pend­ing on how much ex­tra money comes be­fore March 31, we could al­ways sort of post­pone some of the other re­ceipts or we can de­cide on ad­vanc­ing some of the ex­pen­di­ture of next year also — that can be done.

JOUR­NEY AHEAD We’re look­ing for­ward to a regime of low in­ter­est rates, suf­fi­cient liq­uid­ity in bank­ing thanks to de­mon­eti­sa­tion

The twin bal­ance sheet is­sue of in­debted cor­po­rates and bad loans of banks was flagged by the Eco­nomic Sur­vey as well. The bud­get has only set aside ₹ 10,000 crore for banks… There is an­other an­nounce­ment with re­gard to list­ing of se­cu­rity re­ceipts (se­cu­ri­tised bad debt)… That will make it trad­able and bring in ad­di­tional re­sources to as­set re­con­struc­tion com­pa­nies which should be able to re­solve many of the stressed ac­counts. Now the ac­tion lies with the banks to im­ple­ment the var­i­ous frame­works which RBI has of­fered.

FIPB has been abol­ished but what about over­seas in­vest­ment in sen­si­tive sec­tors? There will be some sec­tors up to some per­cent­ages which will re­quire gov­ern­ment ap­proval. In such cases, the ap­provals can be del­e­gated ei­ther to the con­cerned min­istry or the reg­u­la­tor. There is al­ready a list of coun­tries which re­quire se­cu­rity clear­ance — there are two or three sec­tors like de­fence or tele­com where se­cu­rity clear­ance is re­quired. In such cases, they will get se­cu­rity clear­ance di­rectly from the agen­cies. It comes to MHA (min­istry of home af­fairs), so they will get it from MHA.

The bud­get an­nounced the idea of at­tach­ing the prop­er­ties of eco­nomic of­fend­ers who leave the coun­try. How is this go­ing to work? We are ex­plor­ing two pos­si­bil­i­ties. One is amend­ing some of the ex­ist­ing acts. The other op­tion is to come out with a new leg­is­la­tion. The work has started. The idea is that (for) such per­sons, what­ever as­sets they have in In­dia will be con­fis­cated till he comes and sub­mits to the rel­e­vant le­gal au­thor­ity.

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