Finance Minister Nirmala Sitharaman on Monday asserted that the government was not going to repeat past mistakes and try to splurge its way out of the economic slowdown, in an apparent reference to the UPA government’s response to the major slowdown in 2008-09.
Speaking at a meeting of the FICCI’s national executive committee, the Minister said the NDA government is willing to spend to pump prime the economy, but stressed that it “shall not repeat the mistakes of the splurging.”
The money that is being spent now will be spent with a clear picture of public asset creation — such assets being that bring greater connectivity, Ms Sitharaman said, adding. “We are showing where the money raised will go so that you can plan your investment.”
Responding to speculation that the fiscal deficit could cross 4% or 5% of the GDP, the Minister said, “I want to tell you that the experiences of the last time that India had a real tough economic situation and the call taken at that time, and post that call, the fiscal deficit number was touched by the government then.”
Alluding perhaps to the 2009-10 budget , when the fiscal deficit target was raised to 6.7% of GDP given the sharp growth slowdown triggered by the global financial crisis, she said: “The splurging with which the economy was expected to reach a better level and rise from the bottom it had reached, are all fresh in our mind.”
After the effects of the 2009-10 fiscal stimulus wore off, growth had plunged sharply again over 2011 and 2012.
When asked why the stockmarkets were not happy on Budget day, the Finance Minister said: “But I see it being happy today. It was weekend mode then, Monday is the true working mode.”
After a sharp 988 point fall during Saturday’s trading, the Sensex gained a modest 136.7 points or 0.3% on Monday.
Defending the move to cap employer’s contributions to Employees’ Provident Fund, the National Pension System or a superannuation fund at ₹7.5 lakh a year, Revenue Secretary Ajay Bhushan Pandey said this will only affect those earning over ₹60 lakh a year.
“In the U.S., they have a 401 (K) account, where also I think there’s a limit to how much employer can contribute. It is being done in many parts of the world and we have tried to see up to what limit,” he said.
Having no limit on EPF contributions, he pointed out, allowed some scope for reducing one’s tax dues by restructuring the salary into various components in such a way that the EPF/NPS component could be hiked. “Therefore, this is not something very unusual that we have done,” he underlined.
The Budget has not factored in the receipt of telecom firms’ dues on account of adjusted gross revenue (AGR), Atanu Chakraborty, Secretary, Department of Economic Affairs, in the Finance Ministry clarified. The government has pegged receipts from the telecom sector at ₹1.33 lakh crore for 2020-21, more than double the ₹58,686 crore expected this year. The telecom industry owes the government ₹1.47 lakh crore, in spectrum usage charge, following the Supreme Court’s ruling last October on the definition of AGRs.
