In the budget of FY 2026, the ratio of loan and GDP (GDP) has been described to bring about 50 percent by FY 2031. Ajay Seth, Secretary, Economic Affairs in the Finance Ministry, told Ruchika Chitravanshi and Asit Ranjan Mishra in an interview that what is the reasoning behind it and he also spoke on the specifics of the budget. The main part of the conversation:
There is a stability in capital expenditure. Do you think that we have touched its limits as a percentage of GDP?
The Finance Minister had said in July that we have brought it to a high level. And further we will maintain it in a nominal form relative to GDP and hope that the states will also spend almost the same amount. There is an emphasis on capital expenditure but we were spending about 1.5 percent of GDP and we have brought it to more than 3 percent level. Fiscal deficit is to be taken care of. Maintaining capital expenditure at a level of more than 3 percent is a good criteria. I want to draw your attention to another aspect which is an effective capital outlay, including the amount given to the states for their capital expenditure. If you rub it all, it is more than 4.3 percent of GDP. Our fiscal deficit is going to be 4.4 percent next year. This means that almost complete pure borrowings of the government are being used to invest in physical infrastructure.
Some things in the previous budget are still left. Such as discourse letters on cryptocurrency, economic policy structure, financial sector vision and strategy documents. What is the situation of all of them?
We are far ahead in two things. We had targeted to complete it by January. But it has taken a little longer. The draft of the economic policy structure is available. We have completed a round of consultation with the people associated with the public policy structure and hopefully we will release the discussion letters by March. Work is still going on on the financial sector’s future point of view. As far as the cryptocurrency sector is concerned, we had almost finalized our discourse letter. Then we realized that many countries have worked on the new idea related to the way this asset class dealt with. Crypto assets are not within the scope of boundaries. It is meaningless for us to discuss such a discussion that does not bring any correct answer to the stakeholders associated with it. We are also in the process of bringing discourse letters on this.
Do you see the scope of a major decrease in fiscal deficit to achieve the target of debt-GDP ratio by FY 2031 or do you think it will be retained at 4.4 percent level of GDP for a few years?
A very senior person has commented that the government is leaving the goal of fiscal deficit. No,not at all. It will remain Even the roadmap that has been talked about to reduce the debt-GDP ratio is mentioned in three levels-low, medium and high to reduce fiscal deficit. The year in which the economy performs good performance means that the economy will be limited to fiscal support and deficit can be reduced on a large scale. On the other hand, when the economy needs fiscal support for spending, then fiscal strength may be less. If you stay at 4.4 percent, then we will not reach 50 percent (loan-GDP ratio).
Will you proceed when you reduce the loan and GDP ratio by 1 percent, as this time?
In FY1 21, the Finance Minister had announced that our goal is to reduce it by financial year by 4.5 percent. This path is very clear. Similarly, by the end of this year, we will be at 57 percent level in terms of loan and GDP ratio. The target is to bring it to about 50 percent (1 percent less or more) in the next six years. In this way the loan and GDP ratio will be reduced by 6 to 7 percent.
What kind of changes are expected in bilateral investment treaty models (Model-BT)?
In view of the global scenario in the model-BIT case, the need to reconsider some issues was felt. We want to make it more and more easy for investors.
How will the Rs 47,000 crore allocated to the Department of Economic Affairs be used?
Money has already been given for many schemes. But there are many such for which it is yet to be released. Apart from this, an attempt is made to get foreign funds for many initiatives and an attempt is made to take advantage of government funds through the construction of new funds, that money has not been provided. When all areas are ready with their plans, allocation can be made for them
Will the Finance Minister ask the states to make loans and GDP ratio to make their financial basis?
We will not give them instructions in this regard. But we say to them that it should not exceed 3 percent of GSDP.
Is 10.1 nominal growth low?
We can call 10.1 percent increase as practical or appropriate estimate. As of December, your capital expenditure was Rs 6.8 lakh crore and according to the revised estimate of FY 25, you are running a target of Rs 3.4 lakh crore in the next three months. Can this be achieved?
The month of January has been good and capital expenses have been 4 per cent higher than last year. The expenditure in the first 10 months of this year has increased by 4 percent more than the 10 months of the previous year.