If you look at the public sector borrowing requirement as a whole, which is an on-budget and off-budget item, plus state government fiscal deficits, then by increasing fiscal deficit, you effectively crowd out private investment, because you do not let the interest rates come down, Rajiv Kumar, Vice Chairman, Niti Aayog said in a conversation with ET NOW.
ET Now: What do you think has been the key undertone or the underlying idea in this Budget?
Rajiv Kumar: The underlying idea or the focus of this Budget has been to spur growth, to make investors' life easier and to get investment into sectors like housing and digital space and to facilitate the small and medium enterprises. Overall, this Budget promoters both investment and growth.
ET Now: The general belief was that some relaxation on the fiscal deficit target was acceptable to push growth, but this time around the Finance Minister has actually cut the target to 3.3 per cent from the Interim Budget target of 3.4 per cent. How are you reading this?
Rajiv Kumar: If you look at the public sector borrowing requirement as a whole, which is an on-budget and off-budget item, plus state government fiscal deficits, then by increasing fiscal deficit, you effectively crowd out private investment, because you do not let the interest rates come down. And the Finance Minister early on in her speech talked about the real cost of capital having to be brought down. To that extent, we will not let fiscal deficit go beyond a point, when seen in the context of the overall public sector borrowing requirement and it is a good thing to maintain. I have never been a fiscal hawk.
ET Now: What about the Budget items with them? Do you think real fiscal deficit will be lower?
Rajiv Kumar: It will be a little lower, given that you are making a huge effort on the non-tax revenue side and on the private sector side through the PPP mode, and because our disinvestment target has gone up and the ETF target has gone up, and we have also done things like recycling of assets and bringing them to PPP.
I think it is time we move the focus away from our conversation only on fiscal deficit, because there are so many other things and features in the Budget that try to enhance growth. For example, the hike in income-tax rebate on home loan interest payment from Rs 2 lakh to Rs 3.5 lakh is a very good idea, because that is the sector where demand has been flagging, that is the sector where multiplier effect is the highest.
Similarly, the tax deduction on electric vehicles is a very good one. Plus, you geRead More – Source