Focus on capex does not make Budget inflationary: Expenditure Secretary

Expenditure Secretary T V Somanathan
Expenditure Secretary T V SOMANATHAN tells

Is Rs 35,000 crore allocated for Covid vaccination sufficient?   

We expect the cost of the vaccination to be Rs 700 per person. This includes the price of two shots at Rs 200-250 each. Then there are incidentals like cold storage, transportation, labour, syringes, etc. With that, it works out to around Rs 700, based on the two indigenous vaccines. So, Rs 35,000 crore will cover 500 million people. This is not a small number. The pattern of funding is still undecided: Will it be fully funded by the Centre or will states too bear the burden? These are decisions to be taken by the health ministry and the NITI Aayog soon. 

There was a buzz around Covid cess. Was that deliberated? 

It was a figment of imagination, largely attributed to journalists and economists. It was not even contemplated.

But a new cess has been introduced — the agriculture infrastructure cess.

Yes, but that is only a substitutional cess and has not increased the total revenue. It is an offset of Customs duty.

But states will get a reduced share of the revenue.

It is more to establish a steady flow into the agriculture fund. It becomes like the central road and infrastructure fund. We want that fund to be adequately funded. This provides a steady stream. Yes, it slightly reduces resources available to states.

Even then, the allocation to agriculture is just 2 per cent higher for FY22, compared to the RE of the current fiscal year.

The biggest programme in agriculture is PM-Kisan and that did not see funds get fully utilised in FY21. Therefore, some money was surrendered. We have made every effort in this Budget to be realistic — whether it is receipts or expenditure.  If, however, the demand for PM-Kisan increases, with more states joining in, we will make additional provisions. 

A sharp hike in food subsidy allocation in the current year’s RE and the next year’s Budget Estimates is on account of repayment of National Social Security Fund loans taken by Food Corporation of India. What encouraged the Centre to account it in the books, especially in a fiscally strained year?

It had to be done at some stage. We had disclosed it last year in the annexure. Last year, for the first time, we made a disclosure. Now we’ve got it above the line. This year, we have tried very hard both on revenue and expenditure to make it as realistic as possible and keep no skeletons in the closet. We have taken them all out. We know exactly where we are and what the real starting point is.

Will this Budget be inflationary as it adopted the Keynesian approach to inducing growth through higher capital expenditure?  

It would be inflationary if there was no supply response. The question is, what is the level of idle capacity in the economy. So there’s a lot of unemployment. And there’s a lot of idle capacity in service and goods. In that situation, the macroeconomic fundamentals will indicate it is unlikely to be inflationary. Some sectors are working at full capacity, such as automobile. But if in those sectors we import items, say in steel, it’s unlikely to be inflationary. 

While you have projected a fiscal glidepath to 4.5 per cent of GDP by 2025-26, the finance commission has recommended 4 per cent by then. Is 0.5 percentage points an escape clause of sorts? 

We are not necessarily going by the finance commission. We are taking them as a broad guidepost. They have again not said 6.8 per cent for FY22.  We have taken the finance commission recommendations as binding with regards to the states’ fiscal deficits. 

Petroleum subsidy allocation has also seen sharp decline. 

Gas prices and petrol are not fully correlated. There has been substantial drop in gas prices over the past 18 months, which is reflected in a falling subsidy. And we don’t expect gas prices to go up so much next year. So, subsidy has fallen partly because of gas price changes and price revisions also have been done on cooking gas in the non-subsidised category, and a little bit on the subsidised category.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel