The government is confident of meeting the targets in the interim budget presented on Thursday, finance secretary TV Somanathan told Anuradha Shukla and Deepshikha Sikarawar in an interview. As for public spending, “government capital expenditure continues to be high and continues to be pushed,” he said. Edited excerpts:
Are you confident of achieving your budgeted numbers?
I’m very confident that we are capable of achieving the 5.1% fiscal deficit target in 2024-2025. We have estimated revenue growth of 11.5% against the GDP growth of 10.5% – the buoyancy of 1.1, which I think is a reasonable assumption. The GDP growth assumption is also quite realistic, and so is the expenditure assumption. It is the nature of public expenditure that you cannot completely predict what will happen over the next 14 months. However, taken as a whole, barring some unforeseen exogenous event of a large size, I don’t see our aggregate public expenditure being very different from what has been projected.Is there a tapering down of capital expenditure (capex)?
I would say there is a tapering down of the capex growth.
But private investment is yet to come…
Which is why it continues to be higher than the aggregate growth of expenditure, higher than nominal GDP growth, which is 8.9%.
Capex is increasing 11.1% (more) than the BE (budget estimate) and 17% on the RE (revised estimate). We are actually increasing it substantially. Yes, it is a lower rate of growth but on a much higher base. Government capex continues to be high and continues to be pushed.
The finance minister has alluded to the next generation of reforms in her budget speech. She is talking about getting states and other stakeholders on board. What could these reforms be?
Many of them are in the states. Of course, there will be reforms to be done at the Centre too, but a lot of the action on ease of doing business lies with states, whether it is licensing permits, water connections, getting electricity connections, getting a road built to the site. These are things that are in the state domain and should be in the state domain. It is a federal country and so we need to work together if these intentions of ease of doing business, ease of living, and promoting investment are to happen.
Will the Rs 75,000 crore for Viksit Bharat come with riders?
It’s a means of incentivising them (states) to do something they want to do, but they may require some support, including financial support to carry out those reforms. But as of now, we have not decided what they are. The guidelines for that will come separately.
There was an announcement in the budget on housing for the middle class. Can you elaborate on how the government plans to do it — whether it will involve interest subvention?
The interest subvention can be only one measure but there are others. For example, the reason that farmers get cheaper credit is not only because of an interest subvention, it is because there are certain regulatory prescriptions on directed lending without necessarily changing any regulation. Also, there is priority sector lending. These are all possibilities which are being considered.
We have got very positive reactions from rating agencies. However, they have flagged debt…
Nothing that we have done has been done with an eye on the rating agencies. I don’t believe that there is anything in their methodology which makes me understand why something is rated the way it is. And therefore, I think the best strategy for me as an officer in charge of public finance is to ignore them — do what we think is the right thing to do and they will do what they have to do. So, I’m not expecting anything from the rating agencies.
The budget has allocated Rs 1 lakh crore to the fund for innovation…
I think this could be a very useful way for Indian companies to use Indian technology in the sunrise sectors. What is proposed here is that there would be an institution nominated by the Centre, a financial institution which would receive the funds on a 50-year, interest-free basis. How it will pass on funds to actual private sector investors is a matter for that institution and the government to work out separately. But they will be in areas of technology that India wants to be in the forefront of… Typically, we would like to encourage Indian innovative technology. This is not like buying out a technology from abroad and producing it — that doesn’t need this finance.
The disinvestment numbers are modest. Is there any change in thinking?
There is one very key change, which is a presentational change, but it also has significance. We no longer see disinvestment as an instrument for fiscal consolidation. Disinvestment is no longer decided on a fiscal calculus. Disinvestment is decided based on optimising value, optimising economic impact. As Tuhin Kanta Pandey (secretary, Department of Investment and Public Asset Management or DIPAM) very eloquently explained, dividends are a very important source of inflows. Now the optimisation of the fiscal position of the government in the short run, by March 31, cannot be at the cost of what is best for the government in the long run.
And we have also found that publishing a calendar of when which company will be divested tends to reduce the value because the market then anticipates that the government is under pressure to do this by this date and then the share is hammered. The DIPAM secretary can best explain it, but it is an integrated strategy. This divestment is one part, dividends are another part and capex of PSUs (public sector units) is another part. So, this is why we are now moving into investment and public asset management.
When will the panel set up to review the National Pension System give its report?
The committee is doing its work. We have listen to a variety of stakeholders, we are doing a lot of calculations, and making lots of estimates and the work is on. We will not be able to give you a timeline.