RATHIN ROY, a senior visiting fellow at the Centre for Policy Research and the managing director (research and policy) of the Overseas Development Institute, talks about the urgent need for corrective measures to speed up growth and why the government needs to have credible plans to implement the budget announcements. Excerpts from an interview:
Q/How do you rate the budget?
A/I have never had any expectations from a budget for more than a decade now because there is no medium-term plan, to which the governments have been operating the public finances. If you do not have a medium-term plan how can one have expectations?
Nobody from the government will be able to answer questions such as ‘What would be the share of agriculture in GDP in 2026?’ ‘What will be the total fiscal deficit?’ ‘What will be the total tax GDP ratio?’ ‘What will be the composition of public spending?’ So if you are not working towards a medium-term blueprint, then every year budgets are essentially jugaad plus. This year is not very different from the earlier budgets.
For the last decade, the government has been operating on a short-term autopilot and there is no strategic vision going forward. Besides, there are targets and statements set, but there is no credible plan to achieve them. In this disappointing state of affairs, one must cease to have expectations from a document such as the budget.
Q/Where has the government gone wrong?
A/For the last few years, the government has been in a silent fiscal crisis and it is almost like a silent heart attack. This is because since 2017 the government has not been able to mobilise the resources it said it would mobilise year after year. The government for a long time has aspired to achieve a tax GDP ratio of 8 per cent. In the last few years, as it was not able to meet that target, it began to aspire towards large disinvestment targets. In the previous year, it aspired to disinvest Rs1.75 lakh crore and fell short of that by Rs1 lakh crore.
Q/Is increasing capital expenditure the right move?
A/[The government] has been doing it consistently over the past three years. However, the overall spending has gone down. The capital expenditure has gone up not because it has been financed by increasing revenues but because the fiscal deficit has gone up massively. Even this year the projected fiscal deficit is 6.8 per cent. It is double what it was before the pandemic. So incremental borrowing has financed incremental capital expenditure and lowered revenue expenditure has financed incremental capital expenditure. However, one needs to note that the quality of revenue expenditure is still very poor.
Q/What can be done to improve the situation?
A/The government should have done what it said on disinvestment. It is like telling a schoolboy what you could have done better in your exams. You were targeted to achieve a certain grade and you failed to achieve it by not just one per cent or ten per cent but by 200 per cent. You have collected only one-third of the disinvestment receipts. Imagine a situation when the government would have met its disinvestment target and had 01 lakh crore, then we would not have a smaller budget; then we would have genuinely expansionary spending.
