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'There's a de-emphasis on divestment'

February 12, 2024 14:43 IST

'We now look at divestment as an opportunity for maximising the value of public assets, not necessarily as a short-term resource-raising measure.'

IMAGE: Finance Secretary T V Somanathan, right, with Economic Affairs Secretary Ajay Seth, left, Chief Economic Adviser Venkatramanan Anantha Nageswaran, second from left, on February 1, 2024 when the Interim Budget was presented in Parliament. Photograph: Sanjay Sharma/ANI Photo

Finance and Expenditure Secretary T V Somanathan, in a free-wheeling conversation with Business Standard's Ruchika Chitravanshi and Asit Ranjan Mishra, says the Budget numbers are realistic and disusses the government's evolving approach towards divestment, welfare schemes, and capital expenditure.


What are the broad principles that guided the thinking behind the Interim Budget?

A combination of retaining growth impulses, working towards the long-term objective of a developed India by 2047, and maintaining a prudent fiscal path -- these were three main considerations.

You have lowered the fiscal deficit target for FY24 to 5.8 per cent from the 5.9 per cent budgeted earlier when you didn't have to. Can you explain why?

First, non-tax revenues have been better than expected.

Expenditure control has been tight and as a result revenue expenditure has not grown much.

There have been some savings in capital expenditure because of absorptive capacity.

So capital expenditure will be 95 per cent of what was budgeted. Then revenues have been buoyant.

All of these together have enabled a slightly smaller fiscal deficit than was budgeted.

We looked at the numbers and it seems there is a slash in 26 out of 37 key welfare schemes in FY24.

That is not slash. That is inability to spend. Reductions in Revised Estimates are based not on their asking and we not giving. There is no such case.

These are cases under the rules of government finance.

A government is expected to inform Parliament if it is not able to spend.

It will become an audit issue if we do not inform Parliament and we do not spend.

We are supposed to tell them in advance if we are not spending.

IMAGE: Finance Minister Nirmala Sitharaman during the interaction with stakeholders from industry in Guwahati as Finance Secretary Somanathan, centre, looks on. Photograph: ANI Photo

So is there a systemic issue creeping in? Are you going to look at why departments are not able to spend?

No. If we start giving them less, they will plan for less.

So we have to give them their full allocation next year.

Please look at any state government Budget or any central government Budget now or in the past 70 years.

You will often see the Revised Estimates being lower than the Budget Estimates. It is nothing new.

Has fiscal consolidation for FY25 been achieved by compressing expenditure as a percentage of GDP?

Quite possibly, yes. I have not checked that, but if it is happening, then it is happening. The numbers are realistic and achievable.

If that is the result of those numbers, that is the result of those numbers.

In a volatile global situation when we need to push demand, is that not demand compression also?

Is it the government's job to constantly push demand? How can I push? I can make a transfer to both of you also.

Is it a government's job to do that? I thought our job was to look after the poor and the vulnerable and to do development-oriented expenditure, not to keep restoring the consumption demand of classes other than the poor.

I don't think it is something the government can keep tracking.

So do you say that after the pandemic, expenditure was high and now we have to normalise it?

During the pandemic, the government had the responsibility to protect consumption because economic activities were destroyed.

Now, we are in normal times. In normal times, it is not a priority of the government to monitor consumption.

In fact, if anything, we should be giving investment and savings a boost. And if you transfer money, is it consumed or saved? These are matters left to citizens. I don't think there is much for the government to do there.

On divestment, is there a rethink? What was the thinking behind not keeping a specific target?

There is a definite de-emphasis on divestment as a source of fiscal resources.

We now look at divestment as an opportunity for maximising the value of public assets, not necessarily as a short-term resource-raising measure.

So, there is sometimes a conflict between short-term resource raising and long-term value maximisation. We have taken a decision not to do that.

So, hereafter, we will have a broader number which encompasses divestment, monetisation, and other similar activities.

What is the calculation behind the 8 per cent decline in subsidies?

It is based on a slight decline in food subsidy and a moderate decline in fertiliser subsidy. These are the two main elements.

But the Pradhan Mantri Garib Kalyan Anna Yojana has been made completely free for FY25.

It is free this year also. So, there is no incremental increase.

We would have seen a decrease if it had not been done.

We are not getting that decrease. It is stabilising at the current rate.

Food subsidy is budgeted come down a bit in FY25.

That is because certain past arrears were paid this year. That reflects the slight increase this year. But otherwise, it is stable.

If fertiliser prices go up, would you allocate more for that?

I do not think that will happen. We have looked at the estimates and are pretty clear that this is the likely trajectory.

A little bit of increase or decrease (in prices) we can accommodate. We will be within our overall numbers.

For two consecutive years, we have not been able to spend the amount allotted for capital expenditure fully. Why?

For two consecutive years, we allotted so much for capital expenditure that they are able to spend only 95 per cent of the allocation.

If you look at the actual capital expenditure, it has increased substantially.

So, if you go on an ambitious increase, there will be some lags in the ability to spend it. It is natural and normal.

In Q4FY24, you have to spend 29 per cent of your revised capital expenditure.

That will happen. In the last quarter, 29 per cent is a very normal number.

In the government, it is never 25 per cent. Approvals come.

The last quarter is a peak period in every government, state and central.

The interim Budget didn't extend the concessional corporate tax of 15 per cent for newly set up manufacturing units that expires on March 31. What's the reason?

It has achieved its goals. I don't think it is worth extending it further.

It was meant to be temporary to induce a particular quick response and it has served its purpose. Now, it should go back to normal.

Feature Presentation: Rajesh Alva/

Ruchika Chitravanshi & Asit Ranjan Mishra
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