Budget 2016: Ideas for India

In this special pre-Budget series, Ideas for India, star panellists Rakesh Mohan, former Deputy Governor of Reserve Bank of India, Jehangir Aziz, Chief Economist at JPMorgan and Sonal Varma, Chief Economist at Nomura discussed the king of all Budget themes, the fiscal balance.
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Feb 23, 2016, 05.06 PM | Source: CNBC-TV18

Budget 2016: Ideas for India

In this special pre-Budget series, Ideas for India, star panellists Rakesh Mohan, former Deputy Governor of Reserve Bank of India, Jehangir Aziz, Chief Economist at JPMorgan and Sonal Varma, Chief Economist at Nomura discussed the king of all Budget themes, the fiscal balance.

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Budget 2016: Ideas for India

In this special pre-Budget series, Ideas for India, star panellists Rakesh Mohan, former Deputy Governor of Reserve Bank of India, Jehangir Aziz, Chief Economist at JPMorgan and Sonal Varma, Chief Economist at Nomura discussed the king of all Budget themes, the fiscal balance.

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Rakesh Mohan (more)

Former Executive Director, IMF |

In this special pre-Budget series, Ideas for India, star panellists Rakesh Mohan, former Deputy Governor of Reserve Bank of India, Jehangir Aziz, Chief Economist at JPMorgan and Sonal Varma, Chief Economist at Nomura discussed the king of all Budget themes, the fiscal balance.

Below is the verbatim transcript of Rakesh Mohan, Jehangir Aziz and Sonal Varma's interview with Latha Venkatesh on CNBC-TV18.

Q: As a person, when you wore your IMF hat, saw a lot of other economies grappling with similar problems, how sacred should that 3.5 percent target be?

Mohan: It is indeed important for the government to provide credibility to its fiscal programmes. So that once they set targets, it is important that the world at large understands that our government means business in terms of keeping the targets and keeping fiscal prudence as among the top objectives of fiscal policy.

However, having said that I would however say that it is important to give a greater focus on the quality of expenditure and the composition of expenditure. It does seem to me that at the current time, when private investment in India is indeed lagging, given the stressed balance sheets of many of the large segments, the corporate sector and the corresponding stressed balance sheets of
banks, the likelihood of private investment reviving in the coming fiscal year does not seem to be very high.

Therefore, it is very important for the government to step up public investment in a credible and transparent fashion. So, it is in that context that I would say is that it is important that the government provide a clear programmes of public investment in roads, in the railways, in health, in urban infrastructure, in ports and so on both public and private.

However, particularly the public investment but the important point here is that they need to do this in a transparent fashion to say that look last year we spent so much in public investment, this year we are going to spend so much in public investment and provide evidence of a big push and also of course set up the implementation procedures.

If they are able to do that then corresponding with that, one needs to look at the revenue sources for such increases and public investment. That could indeed be either through the IIFCL as of Budget borrowing or I would even say that one could suggest that there should be special infrastructure bonds floated by the government whose proceeds go into the public account which is not lapsable and whose proceeds are only used in public investment. They would be no different from many other bonds but they should be labelled as infrastructure bonds whose proceeds get separated from rest of the Budget.

Q: What is forgivable in the form of fiscal largest, not 3.5, would you be okay 3.6-3.7-3.8-3.9?

Mohan: I don’t want to focus on a particular number. As I said, what is more important are public investment figures and credibility in being able to make their public investments in infrastructure sector.

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