“Unfortunately, these days people have got used to T-20s. Anyone who doesn’t keep hitting sixes, is not considered good,” said Finance Secretary Ashok Lavasa in defence of the projections in the Union Budget 2017-18 that have been perceived as “cautious”.

Lavasa, in an interview to BusinessLine, said it is not fair to compare Budget Estimates for 2017-18 with Revised Estimates for 2016-17. Stressing that India is acknowledged globally for its conservative approach to financial management, Lavasa, who is also the Expenditure Secretary, said that the changes — merging of Railways and General Budget as well as doing away with Plan and non-Plan expenditure — in the Budget were not “difficult”, but required a lot more effort and consultation with various ministries. Excerpts:

The Finance Minister in his Budget speech outlined external challenges of the monetary policy stance of the US Fed, firming commodity prices, and threat of protectionism. Are the Budget proposals sufficiently equipped to take on these challenges?

The global economy has been sluggish but exciting enough for the domestic economy to depend on it. Another trend, which started off with the Brexit last year, is the increasingly protectionist measures that countries are starting to take.

How do we cope with such a situation? We have to boost investments and invest in sectors that will create employment as well as meet the infrastructure requirements. The Budget has emphasised on consolidating schemes that are doing well and will have a greater impact on the rural areas. It has tried to invest in sectors that are vital to social economic growth. The focus is also to strengthen the infrastructure. And in all these areas there is a fair amount of higher allocation.

Why are the Budget projections on expenditure and revenue conservative?

One of the distinguishing features of the last and this fiscal (2016-17) is that there was no cut in the Revised Estimates (RE) versus Budget Estimates (BE), which was the trend earlier. There were years when the RE was cut to help the government manage its expenditure and ensure other targets were met.

For the next fiscal, we have been constrained in our targets as we did not tinker with the indirect taxes due to the roll out of the Goods and Services Tax and because the bonanza from oil prices may not be available to the same degree as this year.

In 2017-18, the indirect tax growth is about nine per cent, but there is a good increase in direct tax collections. If we are realistic in our revenue projections, then we can’t be unrealistic in expenditure planning. To balance the Budget, we can only provide for the amount we hope to receive.

To what extent is the Budget depending on crude oil prices? Why has it has been quiet on subsidy reforms?

It will be manageable, till crude oil prices are about $65 per barrel. There is an expert opinion that the market is so structured these days that if there is an increase in oil prices, then other forces such as shale gas will have a moderating influence.

On subsidies, the government’s intention is every clear that it wants to rationalise it. We are moving in that direction in the petroleum sector. There has been considerable reduction in kerosene subsidy through lower global prices and gradual increase of kerosene prices through public distribution system, besides weeding out those who have LPG.

We also want to do direct benefit transfers of kerosene subsidy. Aadhaar seeding and verification of beneficiaries are being done. There is also a move towards becoming kerosene free by States and Union Territories such as Haryana, Chandigarh, Telangana and Andhra Pradesh.

With the NK Singh committee recommending a reduction in the debt to GDP ratio, how far will the Budget address concerns of international rating agencies?

I don’t know how rating agencies work. In the past there have been some sentiments expressed that rating agencies have not very objective to us.

The government is not only committed verbally, but has also demonstrated that it is following the path of fiscal consolidation. And year after year, we have lowered our fiscal deficit. That is a big positive for the government, especially in an environment, where there are so many competing demands for development expenditure. Eventually, when the government examines all the recommendations of the committee, it will take a call. But earlier too, the government had followed the path of consolidation and fiscal prudence, and we will continue to do so.

The fiscal deficit target will be lowered from 3.5 per cent to 3.2 per cent next fiscal and we will lower it further to 3 per cent in 2018-19, which is what the NK Singh committee has recommended. I think we are in that direction. The revenue deficit is also coming down.

How will the new expenditure classification help improve the quality of spending?

It will bring more efficiency and transparency. The old system of classifying expenditure led to a lot of ambiguity. Now everyone clearly understands what revenue expenditure is and what capital expenditure is. Also, conventionally in the government, non-Plan expenditure is considered bad and Plan expenditure good. But, even on the Plan side, there was a lot of revenue expenditure. Now, departments have a choice of where they want to put money. The government’s intention and priority is to complete a scheme or a project rather than starting something new every year.

There have been concerns that the capital expenditure for 2017-18 when compared to the RE of 2016-17 has increased by just about 11 per cent?

Why should we compare the RE to BE? We should compare the BE to BE. Budget Estimate is estimated at the start of the year while Revised Estimate is after a review, so this comparison is a little unfair.

Let me illustrate: Last year, the allocation of MGNREGA was ₹37,500 crore. During the course of the year, it was discovered that there were arrears of ₹10,000 crore that had piled up. The government provided for clearing the arrears and decided to spend ₹47,000 crore in 2016-17. In 2017-18, the BE is ₹48,000 crore. So it is not comparable and it is not an increase of just ₹1,000 crore we have made. In all we have made an increase of over ₹10,000 crore compared from BE to BE.

How difficult was making the Budget 2017-18, with two big changes of merger with the Rail Budget and scrapping of the Plan and Non-Plan expenditure?

I won’t call it difficult, but the time available was less and it required a lot more effort and consultation with various ministries. The Railway Ministry had to work overtime to bring its their proposals and discuss them with us. Earlier, the Finance Ministry would just talk about how much money it would give to the Railways. The merger of Plan and Non- Plan expenditure meant considerable amount of homework. We had to create dummies for 2016-17 in the new format that all Ministries followed. There were also meetings on whether the format was fully reflected the government’s intent.

Will there be a further amalgamation of the Railway and Union Budget from 2018-19 onwards?

The government has always said that the autonomy of the Railways in operations and financial decisions will continue. With the integration of the Budgets only budget making is not going to be a separate exercise. Now, we have more opportunities for multi-modal transportation planning, which is the need of the hour.

There are concerns that the UDAY scheme has stressed State finances…

The distribution sector in electricity has been in doldrums and requires a major corrective effort. In this case, it meant that States had to take on a heavier burden of the debt. I believe they were obliged to take on this burden for the simple reason that the discoms went into this difficulty, either because they did not revise the tariff, or because their collection was poor or because the State didn’t provide them the subsidy they promised.

All in all, the discoms, were the babies of the State governments and had to depend on them. We only hope that they have learnt their lessons and the mistakes of the past are not repeated.

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