Budget 2020: 10% GDP growth a conservative estimate, says Atanu Chakraborty

With a conservative lens, these are the numbers that looked plausible, Chakraborty said

The GDP growth and tax revenue forecasts announced in the Budget are realistic and conservative, Economic Affairs Secretary Atanu Chakraborty told Arup Roychoudhury in an interview. Chakraborty, who contributed to the finance minister’s speech, said NSSF loans are crucial for Food Corporation of India to initiate a clean-up, and the proposed exchange-traded fund for government securities will be launched in H2FY21. Edited excerpts:
 
What are your assumptions behind the 10 per cent nominal GDP growth rate? Are your real GDP growth estimates similar to those in the Economic Survey?
 
Overall, a 10 per cent nominal GDP growth rate is a conservative figure. If you look at its break-up, real GDP growth is in the range of 6.0-6.5 per cent, with the inflation component at broadly 3.5-4.0 per cent. This is the range being projected by various agencies. With a conservative lens, these are the numbers that looked plausible.

 

At 10 per cent growth, how feasible is gross tax revenue growth of 12 per cent and personal income tax (I-T) growth of 14 per cent, despite foregoing revenue of Rs 40,000 crore because of reductions? Where do you see the growth coming from?
 
If you look at the numbers on the receipt side, the budgeted estimate for gross tax revenue during FY21, at Rs 24.2 trillion, is less even than FY20’s budgeted estimates of Rs 24.61 trillion. This shows the conservatism. We have also been conservative on revised estimates for FY20, at Rs 21.6 trillion. If you take the revenue foregone, the year-on-year rise has to be much higher than before.

 
We wanted to be conservative because last year, people were blaming us for being a bit optimistic. These are safe and realistic estimates. We expect some revenue to come in from dispute settlement schemes, including Sabka Vishwas. Naturally, the disputes will get settled and the environment of disputes will also go away, because now a lot of money gets stuck in disputes.
 
Therefore, we are expecting some good amount from that, in spite of foregoing Rs 40,000 crore in various sops.
 
Net tax revenue shortfall for FY20 was at 0.7 per cent of GDP, and fiscal slippage was at 0.5 per cent. Did the fiscal slippage entirely compensate for tax shortfall and not for any expenditure?

 
Just because it’s fungible, how can you say it is meant just for that? This year, we knew that growth rates were coming down and this was a good opportunity for the government to ensure efficient and quality expenditure. Hence, the entire capex was up-fronted. If you see our capex at December 2019 vis-à-vis December 2018, it was 16 per cent higher.
 
So, the expenditure aimed at growth was not sacrificed. Our aim was not to have huge unspent balances. If you see the revised estimates of Rs 26.98 trillion, it was revised from Rs 27.8 trillion Budget estimates, without sacrificing any fund. Extra funds were provided for capital expenditure plans, and so was MNREGA.

 
You are dipping into the National Small Savings Fund this year more than what you had budgeted. Though you are showing transparency, is it not a dangerous precedent, especially in the case of Food Corporation of India?
 
Let us consider an example. When you buy a house, you either take a loan from your brother, or go to a bank. In the first instance, the loan may have been taken from within the family, but it’s not like it won’t be repaid. Therefore, whatever the FCI takes from the NSSF will be repaid, and it has been provided for from the Consolidated Fund of India — both the interest and principal. It becomes government liability like it always has been.

 
The payment and interest from this year are already part of our annual spending, so they will reflect in expenditure figures. We have a fiscal glide path and are very mindful of whatever we provide from whichever source. Had it come from banks, you wouldn't have asked me this question.
 
Now, why are we saying it up-front and doing it? This is because the FCI needed this money as their procurement for non-buffer needs were almost as much.
 
Therefore, for them to bring in efficiency in their procurement processes and for cost cutting, it is important they get a loan and then work on it, instead of being dependent on the Budget all the time. This has a backstop in the Budget to push for more efficiency by FCI.

 
How much of your borrowing do you plan to raise from the proposed Exchange Traded Fund (ETF) for government debt?
 
ETFs are among the safest modes of investment. The Department of Investment and Public Asset Management already has an ETF for corporate debt. We wanted that on the G-Sec side, which has been a thought process for some time.
 
The ETF will be launched in a calibrated way, with a small amount to start with. It will be in multiple tranches just like equity ETFs. It will require some work and I don’t expect it to be launched before the second half of FY21.