“The final view of the government was that if we spend more, will we reach 9 per cent or 10 per cent growth,” says Shaktikanta Das, Secretary Department of Economic Affairs, Finance Ministry, as he defends the 3.5 per cent fiscal deficit target for 2016-17 set by the government.

As the Secretary Economic Affairs, Das, is the key man in Jaitley’s team and popularly known as the ‘number cruncher’ among the government officials as well as world outside. Firm that the projections in the Budget are all “very realistic and credible” he shares with BusinessLine the thought behind fiscal consolidation blue print, why one has to be careful on currency, and public-private-partnership. Excerpts :

Is there a need for fiscal framework review, 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 not be just thrown like that. The spending has to be targeted and it has to have an outcome.

We also have to look at the debt sustainability. What has helped India to remain firm in the global headwinds is the fiscal discipline over a decade is the existing Fiscal Responsibility and Budget Management Act. Taking all this into account, the government decided to keep the 3.5 per cent fiscal target.

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. On the revenue side, the growth in tax revenue is projected at 11.7 per cent against the nominal GDP growth of 11 per cent. The 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 public sector units. In 2016-17, we have reduced the target for minority stake sales to ₹ 36,000 crore and for strategic disinvestment at ₹ 20,000 crore.

Meanwhile, the Budget has targeted ₹ 99,000 crore from spectrum, 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 defence One Rank One Pension is fully provided for. Similarly, interim provisions have been made for the Pay Commission report. However, we will wait for the Committee of Secretaries report before taking a final decision. If additional provisions need to be made we can do it later.

One of the options to make exports competitive in the Economic Survey was to devalue the rupee…

Overall, a weak rupee benefits exports. But, the market has to find its own level. Every time the rupee becomes weaker or if it is devalued, the foreign buyers re-negotiate the contracts. Second, every time the rupee becomes weak, foreign investors lose confidence and their investments take a hit. Third, our debt repayment — both private and government, becomes more expensive. Also, it impacts the current account deficit and inflation. We need to be very careful.

The Budget has announced a legal framework for dispute resolution in public private partnership projects and public utility contracts…

A Public Utility Dispute Resolution Bill will be brought by the Finance Ministry and implemented by individual ministries. Similarly, we have also said that guidelines for renegotiation of contracts will be spelt out. Given the dynamic and volatile nature of the economy, a contract with a 30 year timeframe can not hold good for the whole period and may require renegotiation. The new guidelines for this will also be issued by the Finance Ministry in consultation with the key ministries.

Why was the need to tweak with Securities Transaction Tax felt?

Trading in the market was completely slanted towards derivatives – it was 14 times more than the delivery based trading. If the markets have to be less volatile, it is necessary to have some reasonable proportion between derivatives and delivery based markets.