Union Budget 2019: Expenditure secretary Girish Chandra Murmu says half of this could come from the private sector.
By Prasanta Sahu and KG Narendranath
Budget 2019 India: In her Budget speech, finance minister Nirmala Sitharaman talked of infrastructure investments of Rs 100 lakh crore over the next five years. Expenditure secretary Girish Chandra Murmu says half of this could come from the private sector. In an interview with FE’s Prasanta Sahu and KG Narendranath, he said the government is hopeful that the industry will respond promptly and positively to the investment-enabling measures in the Budget. The expenditure target will be met via the Budget or other means, such as spending from other public accounts, he said.
On the face of it, the Budget seems fiscally tight but the expenditure increase projected appears to be pretty high when viewed against the CGA-vetted FY19 base. Conventional sources of public investments are drying up as these have been put to good use in the absence of private investments. You are betting big on the steps in the Budget to stimulate private investments, but these might not fructify quickly to produce the desired outcome. Global situation is also a dampener…
We have based the Budget on FY19RE numbers, which is reasonable. If you compare with the actual numbers of FY19, the target indeed looks a bit high. It is a misnomer that expenditure was much lower last year. It is just that our processes (of spending) have been a bit different. The budgetary spending may be a little lower (than RE), but overall expenditure targets were met (about 98%), through Budget and off-Budget means. We used certain savings, which are parked elsewhere, and sometimes we also resorted to public accounts other than the Consolidated Fund of India such as the NSSF. This may continue for a while, so I don’t think the spending target is not achievable this year.
This Budget talks about an enabling environment to address slowdown in consumption, the issue of stressed financial sector, liquidity problems and the global headwinds to growth.
With government expenditure remaining constant or growing a little bit, we hope more investments from the private sector will come in. If the Budget proposals are implemented in right earnest, the industry and private sector will respond appropriately, as they have done time to time since the 1990s.
The tax revenue targets have been lowered from the interim Budget level, but even after this, if these are compared with the actual numbers of last year, an 18% growth gross tax revenue growth is budgeted for FY20, which is optimistic….
Direct taxes are projected to grow 17% and indirect taxes 15% (from actual levels), overall growth needed for next year is about 16.5% or so. This is doable as revenues are stabilising. Non-tax revenues such as disinvestment receipts will see substantial increase. We can realign expenditure at the revised estimate stage after factoring in revenue performances. I don’t see any kind of mismatch.
The Budget talks about Rs 20 lakh crore/year investments in infrastructure for the next five years. How much of this is expected from the private sector?
More than 50%. We have announced a number of measures including credit guarantee for the MSME sector, resolution of angel tax issue, liquidity support to NBFCs, lower tax rate of 25% for MSMEs, incentivisation of electric vehicles and the affordable housing sector, easing of FDI norms, strengthening banks through recapitalisation, etc. These will have a holistic, wholesome impact on private investments. In the case of the railways, PPP and other models may be tried in different kind of operations and station development.
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Budget and off-Budget capex in railways together is about Rs 1.5-1.6 lakh crore/year, this should be leveraged at least five times. Land holdings and railway stations can attract massive private investments. Monetisation of both brownfield and greenfield assets, asset recycling, etc will be tried. These efforts will bear fruits. InvITs and REITs are being encouraged in the brownfield asset recycling in various sectors.
We don’t see much of an increase in the outlay for healthcare sector.
There will be extra-budgetary borrowings through the Higher Education Financing Authority, which finances medical education, upgrdation of district hospitals, etc. A lot of attention has been given to the sector.
After the success in reining in fuel subsidies, the overall subsidy bill seems to surge again…
If you compare subsidies as percentage of GDP, it has been constant at 1.4-1.5%. The plan is to make these more targeted. Direct benefit transfer has curbed wasteful spend on LPG and kerosene subsidies. After PM-Kisan, now farmer data are more authenticated with Aadhaar. Fertiliser subsidy can be given directly to farmers using the data on land holdings, soil health card, etc in a gradual manner.
However, unless we have all paraphernalia, we can’t disrupt the existing system abruptly. Whether farmers will pay the reduced price or use a wallet from which traders can draw at the time of transaction are some of the things being looked at. DBT in food also needs to be scaled up.