Finance secretary Arvind Mayaram says there is plenty of substance for growth in the Budget. In an edited talk with Vrishti Beniwal, he speaks on subsidies, divestment and the deficit, among others:
There is a view that the Budget had too many small schemes but didn't come up with any big ideas.
I have not understood what is considered to be a big idea. We believe there are a large number of ideas there. For example, we have corrected the inversion of duties, looked at the whole slew of incentives for micro, small and medium enterprises, and provided an investment allowance. All these measures will revitalise the manufacturing sector, which has been in doldrums. Similarly, if you look at the infrastructure sector, you have Real Estate Investment Trusts (getting pass-through status) and long-term financing which is coming in.
Why didn't the Budget spell out a road map for subsidy reduction?
An expenditure management committee has been set up, which will give a road map on how to reform government expenditure, including subsidy. You can't say 'let's abolish subsidies' in a Budget. There are a large number of people who are poor, vulnerable, marginalised and need to be protected. So, you need to better the targeting of subsidies. The committee's first report must be given in the current financial year.
So, subsidy reforms as recommended by it, can be brought only from the next financial year?
Obviously. Here I'm talking about big-ticket decisions. But normal decisions can be taken even during the year.
Subsidy rollover has been increasing every year. How do you plan to tackle the problem?
How do you change that? Every year, you pay for four quarters. The last quarter's bills can come only in April (the first month of a new financial year). So, unless you start making advance payments, which means next year's expenditure this year, there is no way of changing the system. The quantity of roll-over changes depends on variation in the rupee and we have to live with it.
You have projected a huge increase in disinvestment receipts, despite missing the target each time in the past few years. What road map do you have to achieve the target of Rs 43,000 crore this year?
Everybody has been telling me that we have perhaps under-projected it. Last year, the markets were suppressed and any sale would have fetched you very little but this year, the markets are high. So, we might fetch more than what we have projected.
You have projected a GDP growth of 5.4-5.9 per cent this year. Have you factored in the downside risks to this growth from tensions in Iraq and a drought-like situation in India?
Iraq tension doesn't seem imminent because crude oil prices have actually come down. So, that is not so much of a problem at the moment, although we don't know what will happen going forward. On drought, the finance minister has already said we have adequate stocks and the government is ready for open market sales.
The Budget projection of 4.1 per cent fiscal deficit (as a percentage of gross domestic product) is based on the assumptions that you would meet targets on disinvestment and dividend payment from public sector units and the Reserve Bank. Would there be an expenditure cut again to meet the target if there is a shortfall in revenue?
Last year, when disinvestment didn't happen, we took higher dividends. At the moment, I don't foresee that possibility. You tell us we underestimate subsidies but you don't tell us that we sometimes also underestimate revenues of this nature (dividends).
The Budget has backed the Financial Sector Legislative Reforms Commission recommendations but some regulators are opposed to the idea of a unified regulator under an Indian Financial Code.
We hope we conclude consultations very expeditiously and find a solution. We will make necessary changes in the (proposed) Code to make it more acceptable and relevant to meet the requirements of the present.
The Rajiv Gandhi Equity Savings Scheme, which was launched to attract retail investors, has not done well. Are you reviewing it?
There is a comprehensive discussion going on it, as to how to make it more liquid and more attractive. There is a lot more to be done. Everything can't be done in one Budget.
What changes will be made in the Backward Region Grant Fund?
What the minister specifically says is that today, it is concentrated on districts. Within districts, you may have blocks. So, he is talking about sub-district units and saying we should perhaps make it more calibrated, to be able to put more emphasis on those sub-district units which are more backward, rather than concentrating only on the districts.