Exclusive: FM bets on government's capex multipliers to catapult economy

Finance Minister Nirmala Sitharaman did some straight talk, as said being conservative was being responsible but was glad for being called a risk-taker, a day after her Budget assumptions on nominal gross domestic product (GDP) growth and disinvestment were described as conservative.

In an exclusive interview to Network18 Editor-in-Chief Rahul Joshi on February 2, Sitharaman said elections come and go but the economy required strong support as it was showing positive signs of revival. There was no doubt in Prime Minister Narendra Modi’s mind that the Budget would be growth-focussed, she said.

"And therefore, there was no doubt in our minds from the very initial stages of working on this Budget that public investment in infrastructure, that is the capital expenditure for the government should be kept up. Even last year we had given a good solid increase in the capital expenditure of the government between 2021 and 2021-22," the finance minister said.

She was responding to a question on why the Budget didn’t have anything specific for the five poll-bound states.

“In a T20 cricket match, the opening batsmen have liberty to take risks and the end over batters have a target to meet. But there is a sweat and toil happening between the two,” the finance minister said, drawing a cricketing analogy to underline the need for government investment-led consolidation.

In the budget she has pencilled in a 35.4 percent hike in government’s capital expenditure plan to Rs 7.5 lakh crore in 2022-23, signalling the government’s intent to do heavy-lifting on investment that would crowd in private investments.

“For every rupee you spend, you get a multiplier of 2.9 in capital investment. Public investment in infrastructure would set off a virtuous cycle and crowd in private investment and trigger a multiplier effect,” she said.

The Budget also showed that the government aims to collect Rs 65,000 crore from disinvestment in state-owned companies in 2022-23, a far cry from the Rs 1.75 lakh crore set out for 2021-22.

“Why the disinvestment target is so high was a question asked a few years earlier. Now the question has reversed,” she said.

"Being conservative is not wrong. Being conservative is also being responsible," the minister, who presented her fourth Budget the previous day, said.

The government also revised the disinvestment target for the current fiscal year to Rs 78,000 crore from the Budget estimate of Rs 1.75 lakh crore.

The disinvestment of the government's stake in LIC would happen in the current financial year. "It's (preparation for IPO) going fine, it will happen. Yes, it should happen this year," Sitharaman said.

With the government already pocketing more than Rs 24,000 crore from disinvestment, the proceeds from the IPO, which could go down in history as the biggest ever in India, will likely fetch the government extra revenues that may exceed the revised target.

Her proposal to tax digital assets at 30 percent created a buzz, with many interpreting it as legalising crypto-currency.

The finance minister, however, was quick to dispel the notion. Through the tax she had tried to draw a distinction between privately generated assets and a digital currency.

Private people are using blockchain to create cryptocurrency but that cannot be the currency, she said. “The currency would be when the RBI issues it,” she said. “The central bank would issue a digital currency,” Sitharaman said, obliquely hinting that for any asset to be called as currency it had to be backed by the sovereign.

The government is yet to table the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which will lay down the regulatory framework for the launch of an “official digital currency”.

It was to be introduced in Parliament’s Winter session, but was held up as the government continued discussions with stakeholders. “The government would come up with a Bill on crypto-currency, but after consultation,” Sitharaman said.