‘Idea of Budget is to boost consumption’

NEW DELHI: Ajay Seth, secretary in the crucial department of economic affairs (DEA) of the Union finance ministry, is not only the in-charge of budget-making processes, but also the ministry’s point person to coordinate policy efforts of various arms of the government, the central bank and states, to ensure that the projected growth path of the economic recovery is maintained. In a conversation with Rajeev Jayaswal, he speaks about inflation, growth and proposed official digital currency. Edited excerpts:

What will be the road map for India’s official digital currency?

In 2022-23, there could be wholesale digital rupee and retail digital rupee. The former can be used in transactions between institutions (like bank-to-bank) while the latter can be used in retail by the common man through electronic devices such as mobile phones. One may come in 2022-23 and the other may come in later. The sequencing part will be decided by the RBI.

What is the current status of cryptocurrency?

The Budget has provided the clarity… All incomes are taxable, except those that are specifically exempted under the I-T Act. It does not say that activity per se has become legal.

Inflation is globally high, particularly in developed economies such as the US. How will it impact the Indian economy?

Various supply side measures taken by the government and the monetary management done by the RBI have been able to keep CPI [consumer price index] well within the policy band. Moving forward, more efforts will be made. In the coming year, I expect CPI within the policy band.

On inflation being high in advanced economies, this is partly because commodity prices are high, but more so because much of the income is chasing a few goods for various reasons, including supply chain disruption that is much more significant in advanced economies than us. Hence, their central banks will start tightening. It may transmit to us… but we are in a far better position, better than any time in the past.

To take care of the bouncy capital flows, which may happen, we have significant forex reserves and robust export growth. But, what concerns us directly in inflation is WPI. We expect that in near future, you will see commodity prices moderating globally from the current level. However, I’m unable to put my finger on how much.

The Budget has focused on productive concessions and incentives rather than giving money directly in the hands of people that could stoke inflation. Was it a conscious decision?

In 2021, direct support was needed not for all, but for the most vulnerable. The government provided that. Its response to the pandemic was a mix of supply side and demand side measures. But, investments have a much larger multiplier effect than mere consumption.

The idea is to boost consumption over the next couple of quarters. The government has consciously adopted — from last year — to raise capital investments. First, to crowd in private investments, and second, job creation. We want to sustain the growth rate at over 8% for a long period that requires financing. That financing has to come from either taxpayers or rent-payers (users of those infrastructure). Important is, there is no tax increase in the Budget.