Finance Secretary Ashok Chawla on Friday defended the budgetary proposals and did not think the duty on petro-products would add to the inflationary pressures in a big way.
“I don’t think the budget is at all inflationary, although the political reaction has been otherwise. We have been extra careful about it. There will be little increases in the prices of petrol, diesel and coal,” he said at a news conference.
Mr. Chawla reasoned that the slight increase in inflation rate would be largely squared up with the attempt to reduce the deficit during the next fiscal.
“My experience indicates that six months later there would not be any impact on the rise in petro-product prices on inflation, though there would be slippage in the immediate term,” he said, estimating that the inflation rate would rise by 0.41 to 0.43 per cent after the notification on cess was implemented at midnight.
On revenue deficit, Mr. Chawla said it was “difficult to take a call” when the government would achieve the target of zero. He also pointed to classification issues that put pressure on the revenue deficit percentage, such as grants to States being categorised in this category.
“Therefore revenue expenditure cannot come down unless we change the accounting practices. We need to look at the classification,” he said.
Mr. Chawla and other senior officials maintained that there would be no impact on the subsidy account in the near term due to the announcement of the nutrient-based fertiliser policy, as the main focus currently is on introducing a scientific method to pass on the subsidy to the farmers.
“The main purpose is not to decrease the subsidy but to introduce a scientific scheme that catered to soil requirements,” he said.
On the move to set up an apex-level council for regulatory bodies, senior officials said there was no move to do away with sector-specific watchdogs.
“We are looking at a larger architecture of regulators. This is the architecture put in place in some form through the legislative mechanism in some advanced countries,” the officials said.
Disinvestment Secretary Sumit Bose said the Centre would not be able to achieve the target for the current year and for the next fiscal, and that discussions were still going on with the line Ministries to identify the undertakings targeted for disinvestment.
Asked about the increase in the list qualifying for indirect tax exemptions as opposed to the trend of trimming the number of sectors, officials said it was a “conscious move” to focus on sectors like agriculture, which is witnessing activity in the cold chain area, clean energy to incentivise alternate energy routes, and medicine.
Mr. Chawla did not think that income tax exemptions would also contribute to the inflation rate. Part of it would go into savings and thus help reverse the decline witnessed since 2007, while some of it would be diverted to expenditure and thus contribute to economic growth.
On the overall economic scenario, he said the results of the three quarters of the current fiscal showed that “we are doing reasonably well.”
On the consolidation of banks, officials drew attention to the unique culture of each nationalised bank, and observed that “we have to think what kind of consolidation would be useful.”