A topic of discussion among all today is whether Finance Minister Arun Jaitley’s Budget 2018-19 will be governed by populism or will he stick to economic reforms. While a strong view is emerging that since it will be an election Budget, Jaitley may adopt a populist approach, NITI Aayog Vice-Chairman, Rajiv Kumar, thinks otherwise.

“This Prime Minister has not done anything so far that shows that he will succumb to populism,” Kumar told BusinessLine hinting that the Budget could continue with the reforms process.

However, given the fiscal stress in the economy, it may not be possible for the Finance Minister to think about cutting taxes, he said while remaining optimistic on strategic sale of Air India this fiscal.

Stating that what some may see as populism could actually be economic reforms, Kumar said, the schemes under implementation such as the Jan Dhan Yojna , or Atal Pension Yojna , or Fasal Bhima Yojna , or Saubhagya Scheme, or be it UjjwalaYojana , all can be termed as populist schemes. “But, are they? I don’t think so. These schemes are taking care of those who have been excluded from the inclusion process. These are part of the reforms initiatives taken by the government.”

“Please understand, if you have a private sector economy and if your economy is market driven, then there is a natural tendency for those who are not so well off to be left behind. Now, who takes care of them? It’s the government. And this is not populism. It is simply a necessary practice of having a smoothly working efficient capitalist market-based economy,” he pointed out.

Fiscal deficit

Asked whether Jaitley should be worrying about the fiscal deficit, Kumar said: “He should always be worrying about the fiscal deficit, as it is one of his major responsibilities. But, he should not be scared of letting the fiscal deficit targets slip, if it is needed.”

According to Kumar, “Public expenditure is counter cyclical instrument. And if the cycle demands that you borrow more to expand productive capacities or to compensate to the lack of private investment or to compensate for many structural reforms you have taken which has disrupted the economic activity then even the NK Singh Committee and IMF — says that you are more than justified in breaching it.”

Breaching fiscal deficit target of 2017-18, if at all, is justified, as there was demonetisation, GST roll out, Insolvency and Bankruptcy Code, among others, he said adding “you had so many new things and economy requires time to settle to the new paradigm. He is fully justified.”

Revenue deficit

However, the number where the Finance Minister should be worried much more is the revenue deficit, said Kumar adding: “He should not permit revenue deficit to rise. His target should be to bring down revenue deficit to zero because revenue deficit means that you are borrowing to consume that’s never a good practice. As long as you are borrowing to expand your productive capacities you are fine.”

“Yes, you can be fiscally responsible but you cannot be a fiscal fundamentalist,” he stated.

Asked if global oil prices will be a cause of concern, he said, “Prices have firmed up and that’s an extra burden on us, but what can the Finance Minister do about it. What we can do is to lower dependence on imported oil and this is what we are doing – we have set an ambitious target of 175 GW of renewable power by 2022 of which 62,000 MW is already up and running and another 30,000 MW is in the pipeline.”