Subhash Chandra Garg says the revenue assumptions in the budget are sound and expenditure has been kept
in check. Edited excerpts from an interview with ET:
Investment is yet to pick up while savings and consumption are both down. How will the budget help address these?
The budget is setting a medium term vision and goal for the economy. We might be in a state of economy where it is not in the best of a roaring stage. Last quarter we grew at only about 5.8%. First quarter of the current financial year may also be somewhat depressed. But that does not and should not prevent the government to set what it would like the economy to be in five years from now. If you set that goal clearly that this is where we want to be in 2024-25, then you will take all necessary measures that are required to boost investment, raise consumption and also plan for an export strategy.
My sense is that the Indian economy is now almost on autopilot as far as 5-6% growth rate is concerned. I don’t think we have seen growth lesser than this in 15 years. Given the dynamism in the economy and the productivity increases, 5-6 % expansion can be presumed as base. The policy reforms, structural reforms can give us that additional 2-3%. The budget lays down some things very clearly — open up for private sector, create avenues for private sector to make investments, open up the financial market system in the country, open up several areas for foreign investment. Temporary periods should not cloud our vision and plan for the long-term.
So this slowdown is a blip and not structural and these measures should be able to address it?
This is a cyclical kind of slowdown for factors which have been there for some time. These will get corrected as we go along. I am not denying that there are structural issues. They will have to be dealt with for that additional 2-3% growth, whether it is agriculture or transportation, railways or power. We will have to get things right in several sectors to push infrastructure. I think the government is quite confident that it can take care of those structural issues as well to get that extra 2-3%.
Is there a plan being worked out to address issues in agriculture or railways?
What you have seen in the budget is signalling from the government. You saw for railways a clear mention on the kind of investment needed. Current investment is not even enough to take care of existing projects. We have to move to PPP (public-private partnership). We will have to take a lot of decisions in the sector. Likewise in the power sector—tariff policy and distribution reforms. In agriculture, a lot of work has already been initiated. The government is conscious of these needs. My sense is that now to achieve this goal, which has been set, it will focus everyone’s attention. Government has already asked for a five-year vision. Groups of secretaries are working on it. Every group working there, whether working on finance or social sector, is now focussed that all that they do should be towards achieving this goal. This synergy will drive us and help achieve the laid down goals.
Fiscal maths has been questioned as pressure on revenues is seen due to slowing economy…
I recognise a little bit of cynicism in tax numbers because we missed (the target) last year. But, now what we have set out for the current year is absolutely realistic. On direct tax side, the strike rate is 17.5 %. There have been some measures such as additional surcharge. So with the base expanding, additional revenue mobilisation measures is a fairly realistic target. On indirect taxes, there is substantial revision. The GST has been substantially revised downwards, which I think is a very low growth over last year.
There are revenue mobilisation measures on excise duty and customs. Taking all together, the projected growth rate of about 15% is fairly realistic. Disinvestment targets we have not missed for the last two years. We should be able to achieve it for this year as well. In fact, we might do somewhat better. RBI was also this year better than previous years on surpluses, and we have somewhat higher projection on dividends this year. All the revenue side measures are quite realistic and should hold out. Expenditure restraint is there. Growth over previous year is only 13%-14%, which is reasonable and fair. You will have to exercise some control. That has been done in the past.
You are banking on non-tax revenues. Does the transfer from RBI include assumption as a result of Bimal Jalan committee’s recommendations?
No. Those recommendation are not available. All that has been included is expected transfer from the financial year. There is no receipt estimated or projected from Jalan panel.
You have given a strong dissent in the draft report of the committee…
Committee is still deliberating. Until the deliberations are over, it would not be proper to comment. Is the government expecting a large transfer? We have a ToR (terms of reference). ToR says certain things. Those ToR need to be answered by the committee.
Markets have reacted strongly against the 35% public float proposal…
I think this was a little unfortunate. The proposal was actually intended to help the markets. I think this belief is shared by everyone that wider shareholding and greater participation from retail and high net worth individuals is positive for capital markets. The government is considering this proposal, it’s not a decision.
The budget announcement says the finance minister has asked the SEBI to look at this issue. So, all that will happen now is that the SEBI would be requested to start the consultation process with all the stakeholders and after that consultation come up with a considered recommendation, whether and to what extent and which kind of companies it would be advisable to raise the public shareholding from 25% to 35%. It would not be immediate.
No time frame has been set. There is no road map. I don’t think there is any need for any immediate reaction on this.