The future projections on the economy, especially the much-talked-about 5.1 per cent fiscal deficit number in the interim Budget, are based on realistic revenue and expenditure numbers, Finance Secretary TV Somnathan told businessline on Friday. Speaking on issues ranging from inflation to capex, the Finance Secretary underlined that government investment cannot be a continuous substitute for private investment.

“There are limits to the government’s ability to keep expanding capital expenditures. There are fiscal limits, and we will adhere to prudent limits. So, it will be what it will be. It cannot be a continuous substitute for the private sector,” Somnathan said. This is significant in the context of the significant rise in the government’s capital expenditure when private investment is not keeping pace.

The Finance Secretary, however, does not believe that private investments are not picking up. Making a reference to the budget speech, he said, “I will point to one statement in the budget that is a concrete example of rapid private sector investment. 1,000 aircraft are being purchased. Is that a capital investment or not? And does that end with the purchase of the aircraft? Is there not a requirement for augmenting ground handling, equipment to maintain, and staff to be employed to handle these? So, capital investment is happening.”

Somnathan maintained that the private sector should invest where it thinks it is prudent to do so. “It is not for me to tell them to invest if they don’t find investment opportunities, but India abounds in investment opportunities. Therefore, I remain very optimistic that there will be rising private investment,” he said.

Talking about the 5.1 per cent target for the fiscal deficit, he said that both revenue and expenditure numbers are realistic, which will help in reaching the set target. “The aggregate expenditure grows at about 6-7 per cent, approximately. I think that it is an achievable number. It’s a mix of a growth of 11 per cent in capital expenditure and less than that in revenue expenditure. Overall, I think the numbers are achievable,” he said.

When asked about lowering the target for the current fiscal year to 5.8 per cent from 5.9 per cent, the Secretary said that the combined total of revenue and capital expenditure is within the expenditure estimates and revenues are slightly higher. “These two together have been enough to constrain the deficit to 5.8 per cent even on a lower GDP,” he said.

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