Global uncertainty is the biggest threat at this juncture. Has the budget done enough to ensure 6-7% growth?
The most direct action the government can take in that direction is what we have done through capital expenditure. There are possible global headwinds. That is one of the reasons we have chosen to go with a large expansion of capital expenditure so that even if there is an amount of headwind, then with that extra thrust in our engines, we can still keep going.
There are absorptive capacity issues in states and some ministries.
On the central side, I’m a little more confident. This year also, I think we will achieve 100% of the central capital expenditure. On the states’ side, we’ll end it this year somewhere between 70% to 80% of what was allocated, which is not bad.
On the central side, the chances of it (FY24 allocation) being spent are high because we have most of the increases going to three clear candidates. One is railways, where there are adequate projects to absorb that amount. Same with the highways. Third, there are some specific investments in the petroleum sector, which relate to refinery retrofitting and strategic oil reserves, which are implementable.
In the case of states, I think the experience of this year will help them speed up next year. We are also going to be faster in seeking and clearing projects. We’re going to probably issue the guidelines very soon, even before the start of the financial year, so they can start sending us the list of candidate projects, which we can then vet.
There’s talk of the private sector investment cycle turning. Does the budget do enough to support it?
What the budget tries to do is, one, as I said, the improvement in public infrastructure, (such as) transportation logistics, something that cuts costs for the private sector. Our infrastructure deficit and logistics bottlenecks have been identified as the biggest competitive disadvantages of our economy. If we address them, I think we are clearly paving the way for industry, manufacturing services and everything to be better and to attract people who otherwise might go to other economies.
The second thing we’re doing through fiscal prudence is keeping borrowing costs limited for everybody, including the private sector. We are not stimulating public capital investment by crowding out private investment. We have not allowed interest rates to go up.
One comment on the budget is asset monetisation has been neglected.
It may not have been emphasised, but (is) not neglected either. We have budgeted ₹10,000 crore in receipts from monetisation.
The budget is quiet on privatisation.
IDBI Bank is proceeding. I think Concor will be proceeding. Candidates that are in the pipeline are going ahead. The ones that need legislation are not in the hands of the administration. Those will be done as and when the legislative change happens.
How about the privatisation of two banks?
That would require legislative change.
On the expenditure side, there’s about 8% growth. Do you see a risk of overshooting next year?
I don’t think, in aggregate, we will overshoot. In any such large budget, you have different line items. There may be fluctuations but overall, our estimates are reasonable. A big exogenous shock will throw them off, but otherwise, normal day-to-day fluctuations and shocks and so on, it’ll probably remain within that broad number.
The MGNREGA (rural jobs programme) allocation has been cut.
We expect genuine demand for MGNREGA to be moderate compared to this year for two reasons. One, we are adding about Rs 40,000 crore in rural areas through the Jal Jeevan Mission and (Pradhan Mantri Gramin) Awas Yojana. So that is going to the same clientele as MGNREGA. That creates jobs. That will be offsetting the genuine MGNREGA demand. Second, the economy is picking up, so again, that safety net feature reduces in its salience. If, however, the demand materialises, we will top it up at the revised estimate stage.
A criticism of the new tax regime is that it disincentivises savings.
If you look at the package of reliefs that the old system gives, it has some for saving and some explicitly for dis-saving, which is, it encourages you to take a loan. Its overall impact is almost neutral. We could selectively say only insurance and fixed deposits, and forget about house loans. So, its macroeconomic savings impact, I think, is negligible.
Second, it affects the choice between savings instruments more than it affects savings. Greater attention is paid to the tax relief features than to the inherent safety, attractiveness, return, convenience of instruments. So, we feel it’s not really a big savings incentive. It’s better to leave it to people to decide.
And finally, if they are still benefited by the old scheme, they can take it as that’s not been withdrawn. The last point – the old scheme has a hidden regressivity. A person actually drawing Rs 9 lakh is not able to save Rs 3 lakh. Only the person with Rs 20 lakh is able to save Rs 3 three lakh. The new system is levelling this for them. So, it is actually beneficial to a large number of the people who are not in those higher brackets.
