Budget 2016: Plans ambitious, but execution to be keenly eyed,says Rangarajan

C Rangarajan, former Chairman of the Prime Minister’s Economic Advisory Council and ex-Governor of the Reserve Bank feels that while the plans laid out by the Finance Minister in the Union Budget for 2016-17 are ambitious, the actual implementation may be difficult and will be keenly watched.

Rangarajan believes the government may not have prepared to fully implement the recommendation of the 7^th pay commission, saying the tone of the FM’s speech and line-up of expenditure indicates that the government may not have fully provided for it.

He also expressed concern that there is no clarity on the actual status of most other schemes like the national infrastructure fund (NIF) and micro-units development and refinance agency (MUDRA) announced over last few years.

However, he appreciates the FM’s decision to stick to fiscal consolidation targets, as he himself is a firm believer that fiscal prudence is important.Below is the verbatim transcript of C Rangarajan's interview with Udayan Mukherjee on CNBC-TV18.Q: What are your thoughts on the way to achieving 3.5 percent fiscal deficit next year and this net borrowing plan of Rs 4.25 lakh crore, is it a credible number according to you?Rangarajan: I think the main thing that stands out is the commitment to contain the fiscal deficit at 3.5 percent of gross domestic product (GDP). We do not know how the numbers gel, one needs to look at it little more carefully.The Finance Minister announced a number of schemes, which will have the effect of increasing the public expenditure both in terms of capital expenditure as well as in terms of expenditure under various schemes.Obviously, I have not seen the documents fully. Obviously, he has not provided fully for implementing the recommendations of the Pay Commission because he said that the committee is being set up to look at it and I have made some provision. So it is not very clear whether the full provision as implicit in the Pay Commissions' recommendations have been provided or not.Therefore, the numbers have to be looked at very carefully but the very fact that he has committed to keeping the fiscal deficit at 3.5 percent of the GDP and therefore keeping the borrowing programme of the government at the slightly lower level should have favourably effect and from my own point of view fiscal prudence is important. We have laid down roadmap for fiscal consolidation. It is not a good thing to go on altering the roadmap for fiscal consolidation. To that extent, the attempt of the Budget to maintain the fiscal deficit is a good decision.In the case of large amount of public expenditures, the real question is not the plethora of schemes that he has announced but how they get implemented.In fact, in the last year's Budget, he announced a number of schemes but we don’t know what progress has been made for example in the National Infrastructure Fund or the Mudra, which was announced. How much have they taken off and how much impact they have had.Therefore, in terms of increasing public expenditure it is good that a rural development, agriculture are getting priority but the question is how well they will be implemented.