On fiscal roadmap, not left with large amount that needs consolidation: Economic Affairs Secyhttps://indianexpress.com/article/business/on-fiscal-roadmap-not-left-with-large-amount-that-needs-consolidation-5566418/

On fiscal roadmap, not left with large amount that needs consolidation: Economic Affairs Secy

The government presented it as an interim Budget, but it had the substance and feel of the full Budget.

Subhash Chandra Garg
Economic Affairs Secretary Subhash Chandra Garg.

The interim Budget 2019-20 is designed to leave more disposable incomes in the hands of deserving people and this will definitely lead to higher consumption, Department of Economic Affairs Secretary Subhash Chandra Garg said on Saturday. On the fiscal roadmap, the government is not left with very large amount of consolidation that needs to be done over the next couple of years, he said in an interview with The Indian Express. Edited excerpts:

On consumer spending push, the budget has focused on giving more in the hands of the consumers and citizens. Did the government feel the need to nudge consumption through budget?

It’s not so much directly focused on increasing consumption but the realisation that these particular classes, the farmers, are not getting the income which is they should have. And since they’re not getting that much income, there was a need to provide them direct income support. That was the logic… Likewise for the middle class, those who report taxable income up to Rs 5 lakh, are really small consumers, they don’t have too much of consumption funds with them. And this was felt that they deserve to retain something more… So this was designed to place income in the hands of those who deserve to have it… this will definitely lead to consumption. They have the income disposable in their hands, it will lead to consumption.

Economic Affairs Secretary Subhash Chandra Garg.

Fiscal consolidation has been kicked further down the road for this year it’s marginally higher but next year compared to the earlier glide path we are at a much higher level. Doesn’t this lead to credibility questions on the consolidation plan, and negative implications in the bond market?

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The expression is too striking, so to say… kicked down the road! We are left (with) not very large amount of consolidation to be done. We are at 3.3 or 3.4 per cent (fiscal deficit as percentage of Gross Domestic Product) in the current year. We had two more years to go, so only 0.4 per cent of adjustment had to be done.

We have done adjustment of close to 1 per cent in three years… So in three years, one per cent of adjustment and in one year, 0.4 per cent of adjustment is all that is required now. I think it’s not postponing or it’s not creating a situation where it becomes too difficult. I think we will be able to do… this is a little harder part but a smaller amount of adjustment to be done. So 2021 still remains our goal to achieve 3 per cent of GDP.

The allocations for the flagships schemes have been lower.

I don’t think there’s a cut down… So take for instance the MGNREGA. Original BE (Budget Estimates) last year was Rs 55,000 crore. It was raised in RE (Revised Estimates) as there was more demand. The estimated expenses from next year are Rs 60,000 crore compared to BE of Rs 55,000 crore. This is a higher allocation. Depending upon how the requirement of funds pan out, if need be, more will be provided In the RE. So the allocation has been done of what the schemes require. There is no suppression of expenditure.

The government presented it as an interim Budget, but it had the substance and feel of the full Budget. Last 14 interim Budgets since independence, we didn’t see any changes on taxation side. But this budget has tax changes and a massive farmer income support scheme this time.

Let’s get it in the right context. The constitution talks about annual financial statement. There is no part-annual financial statement. So all the interim budgets that have been presented… all of them presented the annual financial statement. There’s no deviation. This year also, we have presented the annual financial statement that is based on the estimated expenditure for the entire year. So the annual financial statement is for this.

In the year when there are elections, the provision is that the government can take Vote-on-Account. This is for the government to decide whether it wants to take a Vote-on-Account or whether it wants to get the full Budget passed … So there was always a technical and administrative necessity to take Vote-on-Account for four months or five months because the process was not complete for the year until the election was held.

But (over) the last two years, after the budget is being shifted to February 1, we have started getting the budget approved before the end of the financial year. So technically and administratively also this year, the budget could have been approved for the entire year. However, the government, going by the convention… has proposed to Parliament only the Vote-on-Account for four months… Now the last thing about taxation (is that) there is no provision in the Constitution which says that the taxation proposals cannot be amended through the Finance Bill.

In 2014 also the indirect tax related provisions were amended through the Finance Bill, so it’s not also unusual that the taxation proposals have been amended in the year of the interim Budget. This year also some basic amendments have been done. There is no constitutional or legal bar in doing this and small amount of adjustment of the proposals have been presented to the parliament. So it’s nothing unusual… it’s perfectly constitutional and perfectly in line with convention…

Again coming back to fiscal deficit, a big question is that you have managed only a 0.1 per cent slippage in the RE but there was Rs one lakh slippage in the GST collections. So how did you actually manage it? Also, the numbers for small savings securities issued again small savings has gone up sharply from Rs 75,000 crore to Rs 1.25 lakh crore in the RE. Is this the correct way to finance your fiscal needs?

We have disclosed in the documents very clearly that GST was undershooting. So, Rs one lakh crore has been reduced. We expect some more revenues to come from the direct taxes and other things, which will make up a part of that. That is how the fiscal deficit of the original estimate will remain. There is some little leftover of the compensation fund and the IGST… So the compensation which is paid, so you’re delivering on, we will make all compensation payment but that leaves some amount in the accounts with the government, which also partly covers the gap and that is how without adjusting for the deficit, we have done it. The last issue that you mentioned about is the small savings.

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Small savings in the mode of financing deficit, it doesn’t add to our revenue. So since there is a good flow of money into the small savings and that money has in any case come to us, it is necessary and prudent to use it first and then borrow. So that is how we have increased the small savings flow from Rs 75,000 crore to Rs 1.25 lakh crore and we have simultaneously reduced the market borrowing.