In a post-Budget media interaction, finance secretary Rajiv Mehrishi dwelt upon the new monetary policy framework, Budget deficit numbers, among other issues.
On monetary policy framework
RBI will target inflation so far as monetary policy is concerned. A monetary policy committee will be in place within FY16. The government will amend the RBI Act to provide for it. Also, we have to come to an understanding with all the stakeholders on the committee.
On why fiscal deficit target was stretched
The central government’s fiscal space has reduced because of the 14th Finance Commission recommendation, that is one main reason. Secondly, oil prices came down, so, there is no urgency to opt for 3.6% in FY16. Thirdly, it is better to go for 3% in 2-3 years to find some money for infrastructure. It is more important for growth purposes. So, achieving 3.6% deficit in FY16 was not pro-growth.
On public debt management office
It will take at least one-and-half to two years to set up PDMA office. It needs time to design, arrange equipment, software, write manuals, rules and procedures. RBI’s core function is monetary policy and banking regulation. Banks are big players, so there is an apparent conflict of interest there (if RBI continues to do debt management).
Plug- and-play mode for power plants
Broadly the concept is you get all clearances such as land, conversion, environment clearance, project clearance. Then bids will be invited for constructing power plant and award it to the best bid. So, the person who wins the bid is not entering into the uncertainty of not getting regulatory clearances. Projects will come up quickly. The bidder also will not have to build into uncertainty cost into bidding. That is the idea of plug and play.
On crude price estimate for Budget
Oil prices are expected to be 29% lower in FY16 than the average in FY15.
On strategic divestment
In strategic sale, you look for a strategic partner, a company. At what percentage stake you get strategic partner will depend on deal to deal. Selling off of government’s residual stake in Hindustan Zinc or Balco are not strategic sales, but
By Rajiv Mehrishi