Experts discuss the road ahead for economy post Budget

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Q: I am approaching this fiscal consolidation in a different angle. India is a country where there is great deal of governmental responsibility that the government has not undertaken. We understand that the only country where 60% of primary education is done by the private sector. No capitalists, emerging markets, socialist no country has such a shameful record. The government needs to get into certain social responsibilities which it has not - how do you reconcile a market need for lower government borrowing but yet a social need for the government to take up more responsibilities. This is going to be a longer term question which can put breaks on the economic growth?

Bery: There is a difference between the size of the government and the size of the fiscal deficit. You can have a larger size of the government by having with the same fiscal deficit by having higher taxes. I do something that we have not talked about. The steady move to a more sensible broad based tax system is fundamental so I am not making any dialogical point about the size of the government.

I think what could be debating could not be the time right now is whether the formulation in the finance commission that India needs to focus on a medium term stock of debt whether that is well conceived given the kind of debt market that we have here and whether that ought to be a cosset or a constrain on government or not.

To me that is a very important part of the fiscal architecture that the 13th finance commission has proposed and the ministry has accepted. A lot follows from that but I think the people, I remember Amaresh Bagchi while he was still alive disputed whether that was appropriate constrain on India.

I came to think it is but once you accept that a lot follows from that and as you know the actual roadmap is going to be articulated over the next 6 months.

So to me it is really once you accepted that containing the debt/dead stock is important then other things follow and then the trajectory becomes a question of short term cyclical management.

Q: If it is an enable then how doyou think is a whole host of even developmental infrastructure is going to be put in for instance the railways are asking fro 1000 kilometers of rail route and yet the plan expenditure or the plan outlay for railways has
gone up by 7% you are not going to get PPP or private sector to get into rail networks into areas which are quite clearly under developed areas - can you harp on fiscal consolidation be under point?

Rao: Let me go back to the question of whether we have overdone fiscal consolidation. I think there is a very clear misunderstanding of the whole stimulus. You can't be really measuring the stimulus through just the deficit.

You need to understand the deficit in 2008-2009 has happened because the loan waiver, pay commission recommendation, the payment of the past fertilizer subsidy, the fertilizer subsidy that accrued the previous year and also there was a large of budget liabilities on account of the oil sector with the oil prices touching the roof. The only stimulus in terms of the positive stimulus that the government gave in that sense of the term for the slowdown was in terms of tax cuts.

As you go along the loan waiver commitment will go, pay commission commitment will go and the oil prices have come down and if the deficit comes down you cannot be saying that we have taken away the fiscal stimulus. This is one.

The second issue there is whole lot of issues relating to the quality of education and the private sector has come up in a large measure particularly in urban areas because of the poor quality of government education.