Note-ban effect not factored into Budget 2017: Shaktikanta Das
03 February 2017
The effects of demonetisation of high value notes, which is a passing phenomenon, has not been factored into the budget and there is no need to do so as well, economic affairs secretary Shaktikanta Das, said. Das, who is on a three-month extension until 31 May, said the budget was fiscally prudent and that growth will pick up next fiscal year.
The government, he said, is committed to fiscal prudence and would rather invest in creating productive assets that will help alleviate poverty than resort to giveaways.
"Instead of giving out doles, the government believes in spending that money in productive sectors like infrastructure, consisting of let's say railways, roads or irrigation," said Das, adding, "Productive expenditure has a multiplier effect to create more employment opportunity and augment growth. If you have to pull people out of poverty, then you need to create productive assets, create an environment where there will be more job opportunities."
Das also said that while public expenditure may not be enough to boost economic growth at a time when private investment is contracting, sectors of the economy which need funding have to be provided with adequate funds. Mere stepping up of allocation need not necessarily help attain higher growth. But there is a to spend on critical sectors and this should be spent well, he added.
Considering that the Budget has been well received and the remonetisation process is almost complete, Das said, economic growth rate could be upwards of 7 per cent in 2017-18.
With cash having flooded into the banking system following demonetisation, he also anticipates borrowing costs to decline further, a development that should revive flagging investment and act as a growth booster. "We are looking forward to a regime of low interest rates, sufficient liquidity in the banking system thanks to demonetisation, and also now government open market borrowing has been reduced," Das said.
On the fiscal gains of demonetisation through a one-time dividend from the Reserve Bank of India (RBI) that the finance minister spoke about, Das said it has not been factored into the budget.
''Whatever we get as a one-time dividend from RBI, whatever higher tax collection we get from Garib Kalyan Yojana, will come as a bonus. It is difficult to make an assessment about how many people will take the benefit of Garib Kalyan Yojana. We will know only on 31 March. In all such schemes, the response comes in the last 10 days. We have assumed dividend from RBI this year almost at last year's level of around Rs66,000 crore. Let's see.''
"The Budget is strong on reforms, built on strong macroeconomic parameters and also strong with regard to fiscal numbers," Das said.
Das said the Budget gave more room for the fiscal side than had been promised, adding that the increase was marginal and could be even be clawed back. The fiscal deficit can be reduced further, but it all depends on kind of revenues that come in.