Q| Finance Minister Nirmala Sitharaman presented a budget with a big ‘borrow and spend’ programme. Is it in the right direction?
A| The finance minister was widely criticised all of last year for her fiscal reticence—that for all the hype in the Aatmanirbhar package, the direct government spends was far too little given the huge loss to lives and livelihoods. Many attributed this caution to apprehension about a possible rating downgrade and all the attendant macroeconomic costs. In hindsight, it now seems like the government was cautious more because of the unusual uncertainty surrounding the pandemic and the urge to keep the powder dry. Now that the pandemic seems to be on the decline and there are spring shoots in the economy, the government felt emboldened to unveil a fiscally activist budget as you call it. The government’s calculation seems to be that spending now during the unlock phase will deliver more bang for the buck than it would have earlier when mobility and economic activity were restricted. The government also seems to be betting on higher growth as a pre-condition for debt sustainability.
Q| What do you think of the disinvestment programme?
A| The budget has replaced ‘disinvestment’ with ‘privatisation’, which I believe represents a welcome mindset change. The government has also said that the public sector will be pared down to the minimum. Let us hope they will take that decision to its logical conclusion, and do so soon enough. That said, the disinvestment outcomes over the last few years have been very disappointing. This time around, let us hope that they will achieve the budgeted number, if not overachieve it.
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