Greater public spending may not have ensured growth of 9-10 per cent, and it was this line of thinking that prompted the Centre to target a fiscal deficit of 3.5 per cent for 2016-17 in Monday’s Budget, said Economic Affairs Secretary Shaktikanta Das. “The final view of the government was that if we spend more, will we reach 9 per cent or 10 per cent growth?” he told BusinessLine in an interview. One of Arun Jaitley’s key men in the Finance Ministry, Das is popularly known as the ‘number cruncher’ among government officials. He firmly believes the Budget’s projections are “very realistic and credible”. Excerpts:
Is there a need for a review of the fiscal framework, and will it suggest rolling targets for the fiscal deficit?
The need for a review was felt as there were various suggestions on the fiscal deficit targets. The final view of the government was that if we spend more, will we reach 9 per cent or 10 per cent growth? Also, what is the absorptive capacity of the ministries, as it will impact the quality of expenditure… Money can’t just be thrown [away] like that. The spending has to be targeted and it has to have an outcome. We also have to look at debt sustainability. What has helped India remain firm despite the global headwinds is the fiscal discipline over a decade. Taking all this into account, the government decided to keep the fiscal deficit target at 3.5 per cent.
But there were many counter arguments – to link the fiscal deficit with credit expansion or contraction and the need for some fiscal space in the midst of global uncertainty.
How will the fiscal deficit of 3.5 per cent in 2016-17 be managed?
It is manageable. Growth in tax revenue is projected at 11.7 per cent against the nominal GDP growth of 11 per cent. Tax revenue growth in this year’s revised estimate is 17 per cent. We have projected a marginal increase in the tax-to-GDP ratio at 10.8 in 2016-17 as against this year’s 10.7.
On the non-tax revenue front, we have issued new guidelines for payment of dividends by PSUs. In 2016-17, we have reduced the target for minority stake sales to ₹36,000 crore and pegged strategic disinvestment at ₹20,000 crore.
Meanwhile, the Budget has targeted ₹99,000 crore from spectrum [auction], which has three components – the license fee (₹20,000 crore), auction (₹55,000-₹60,000 crore) and arrears (₹15,000-₹20,000 crore).
On the expenditure side, the OROP is fully provided for. Similarly, interim provisions have been made for the Pay Commission report. However, we will await the Committee of Secretaries report before taking a final decision. If additional provisions need to be made, we can do it later.