Taking time out of his busy schedule, Planning Commission Deputy Chairman Montek Singh Ahluwalia shares his views on the budget with The Hindu:
What are your general reactions to the budget?
This was a well-balanced budget, responding to the critical needs at the moment, which is to bring the macro imbalances under control. The most important thing right now was to deal with the large fiscal deficit, which had become a cause of worry.
Also, the current account deficit is a mirror image of the fiscal deficit. It is possible to have a current account deficit when the fiscal deficit is not a problem because there is excess demand in the private sector. In this case, the deterioration of demand took place in the public sector and the current account deficit reflected that. So we had to get the fiscal deficit under control.
He has always given a very strong message that the solution to India’s problem is to get the growth going. That is not something that can be done by just fiddling a few taxes here and there, even though that is an important area.
In our situation the most important impediment to growth was the hold up in the implementation of large projects where various clearances somehow were not coming… I feel that if we can get rid of these impediments in a sensible way, this does not mean that environmental considerations are ignored. The Finance Minister has rightly given a strong signal to foreign investors that the fear that our tax regime was going to be unpredictable is not warranted.
On the tax side, the GST is the most important. It is an indication of good faith to ask the State governments to come out and work with the Centre. The proposal to have a commission on tax administration is very important since people have felt our tax administration is not modern. We need that to raise revenues without having to raise tax rates.
How would you react to the budget being called populist/with an eye on next year’s elections?
This budget was definitely not populist or aiming at next year’s election in its nature. A populist budget means excessive expenditure and not looking after deficit. It is not that at all. Most analysts looking at the budget and asking if the government has been irrational just looking for election sops would come to the conclusion that it has not done that. That is good.
The most important thing for the people is to get growth going as that is what is going to give employment and a rise in incomes.
What is this budget’s impact on the social sector likely to be?
On health and education, there has been a very substantive increase in the expenditure-level compared to what they were able to spend in the current year. They have to get their act together to be able to put in place the spending capacity— both the Ministries and the Sate governments. Expenditure can only take place when money is released and the State government spends it there after the next amount is released.
What is the overall impact of this budget with regards to the current state of the economy (price rise, inflation etc) likely to be?
It is crucial to restore confidence in both foreign and domestic investors. It is important to bring the growth rate back to above 6 per cent. I have faith that this will happen. However, it is not just the budget alone, as the government needs to act on many fronts. The budget is simply one of them. I think the budget has done what it had to and now it is up to the system to respond.