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Last Updated : Jun 01, 2016 08:56 AM IST | Source: CNBC-TV18

India on target to see 3.5% fiscal deficit in FY17: Ashok Lavasa

Financial Secretary Ashok Lavasa says planned expenditure budgeted by the government has been fully met with spending focussed on social and economic sectors.

The policy interventions made by the government in the Budget are beginning to show results, says Ashok Lavasa, the Finance Secretary on his first day in office.

"We only hope to continue the trend that the government has established," says Lavasa.

He is confident that the government can achieve the fiscal deficit target of 3.5 percent for FY17. The planned expenditure, budgeted by the government, has been fully met with focus on social and economic sectors. 

He says that decisions need to be taken to encourage people to invest as confidence among the public improves. For this, he says, expenses have to be managed to target productive sectors. Also, he says, spending has to be done in a way to create more employment.

Below is the transcript of Ashok Lavasa's interview with CNBC-TV18's Sapna Das.

Q: Stellar numbers in terms of  the growth figures. FY16 projections are really looking much better than what was anticipated. What is your take on this and do you expect this trend possibly to kind of pickup or if not that at least to kind of maintain the pace over the next couple of months?

A: The numbers have come out and they are looking good. It is a very healthy trend which has been established. I think with the efforts that the government has made in the past few years, particularly in the last one year and all the announcements that were made in the Budget, the policy interventions which were made by the government, they are now beginning to show results.

We can only hope to continue the good trend which has been established.

Q: FY16 fiscal deficit numbers in the range of 3.92 percent, slightly higher than 3.9 percent, what would you say, more or less on trajectory?

A: Absolutely on target. 3.9 percent is what we had expected and the provisional numbers which have been released by the Controller General of Accounts (CGA), I think they are bang on target.

We are confident that the measures which the government has taken should also continue in terms of maintaining the fiscal deficit numbers for the current year.

Q: This year's target of 3.5 percent, it is too early as of now, the Budget has just got over, you are towards the end of the second month of the current financial. Are you optimistic on sticking on to this 3.5 percent for FY17 because here the challenges would be slightly more or even slightly different than what we have faced in FY16?

A: The challenge is to maintain government spending and general fiscal deficit numbers within the boundaries which the government has set. At the same time find the resources and employ them for the productive areas which will contribute to economic growth.

Q: Confident of 3.5 percent as of now?

A: Why not? I see no reason why we cannot maintain these numbers.

Q: You also spoke about capex. The fact remains that we need to probably continue to the pace of  pushing capital expenditure. Last couple of months in the last financial year we saw a very healthy trend, do you expect that to continue? We have enough resources in the Budget to take care of that?

A: What the umbers today have revealed both the GDP growth numbers and the figures which the CGA has brought out is that after many years you have seen the planned expenditure which was budgeted  by the government has been fully met.

There are good trends in this that the spending has been on economic sectors as well as on social sectors.

In fact if you look at the numbers of the last few years, after many years you find that the downward trend of spending on social sectors and economic sectors has been reversed this year. So, when you compare the spending of 2015-2016 with 2014-2015 you find that we are moving northwards.

Q: So, you have to maintain this pace if not pickup slightly in the current financial year in terms of  pushing capex because private sector investment is yet to show clear signs of a pickup?

A: Current financial year also the target which the government has kept for itself and what we have put in the Budget is a significant step up on capital spending both through budgetary resources as well as extra budgetary resources. So, we are looking at a number which is upwards of Rs 8 lakh crore in comparison to what was done. Don't forget that last year also we had recorded about 12 percent growth in capital spending.

So, we feel that good signs are now visible and confidence is building up. We should be able to find the resources, we should be able to take decisions which will encourage people to invest.

Q: Are you anticipating any kind of resource crunch in the second half of the financial year or we are comfortable with what we have as of now?

A: When you say you have to find resources, it only means that you have to manage your expenditure in such a way that you target the spending in productive sectors.

It is not that we are anticipating any shortfall, in fact in 2015-2016 the gross revenue collection, the tax collection, the non-tax receipts all of the targets have been achieved.

So, I think this trend should continue and we will be able to put out money in such a way that you find more employment that is being created and it is a targeted spending on the sectors which are a priority to the government.

Q: One more quick question on oil front, oil prices consistently have been inching up around the USD 50 mark now internationally. Is this a cause of concern for the government, how do you see this panning out, any kind of a possible impact, any kind of a thought process on this which is already on because I am very sure that whenever government comes out with numbers, there is a enough planning that goes behind the scenes, your thoughts?

A: Considering that this is affected by global trends and the prices which prevail in the market. They are not something which is possible for government here to control. Any planning will take into account the trends which are going on in the market and how external factors can influence these trends. We are not overly worried about this, but at the same time we are keeping our fingers crossed and we are looking at the market and we are seeing how it is going to impact us.

Q: So the comfort level would be what, around USD 50-55 internationally?

A: I don’t see a point in putting any number on the price, but any dynamic economic management has to take into account whatever fluctuations that take place in the market.

Q: There is one more added question here that just supposing that the price rise in terms of oil continues, now we also know for sure that for example in the financial year ended Rs 1.55 lakh crore was collected via just the excise duties on petroleum products like diesel and petrol. We also have some kind of a back of the envelope estimate for this financial year. Now what would happen to that because you may also have the inflation worry, so is there any plan here because there will be a comfort level beyond which the government will have to do some kind of a balancing, possibly oil companies passing on the price rise, already some increase has already happened, but also kind of a rolling back excise marginally at least anything down the line because that’s a serious concern for the end retail consumer also?

A: We should cross the bridge when we reach it and so many possibilities exist. It is premature for us to say at this stage how you are going to deal with this situation, but you have to carefully watch the trend. You have to assess its impact on the economy and take the decision which is appropriate at that point in time.

Q: One last thing on the oil front, but supposed it would be balanced policy decision on the part of the government in case prices really start going up, shoring up. If there is bit of a price rise then you also roll back bit of the excise duties. It has to be a combination because already because already lot of padding which is there in the retail price, consumers haven’t got the benefit so to speak of when the oil prices really crashed.

A: As I said that you have to assess its overall impact and you have to take decisions keeping in view the totality of the circumstances. It is not as if that price fluctuations have not taken place in the past and the economies and countries have learned to deal with them.

Q: What’s the thing on the inflation front, is that okay right now are we in comfort zones, we are just very near to the next RBI review on June 7 any expectation, any hope?

A: I think inflation is well within control and we hope that with the forecast of a good monsoon things will cheer up again, particularly in the agriculture and sector in the rural economy.

Q: Don’t really expect lot of price pressure on other food products except for like pulses there is already got a bit of a pressure on that front, but don’t expected another food product prices.

A: I don’t think so.

Q: Also the 7th Pay Commission rollout. This is a one question that a lot of people have been asking us. Any kind of a signal on that, when would it be possible for the rollout to actually happen? We got to hear sometime possibly towards end of June or early July?

A: Well, the report is out. It is being examined and there is a committee of secretaries which is looking into the report. As soon as committee makes up its suggestions to the government then the government will be in a position to take a decision on that.

Q: But what like a month, two months or three months?

A: In fact, as far as the budget is concerned we made provisions in the current year’s budget to take care of the impact of the recommendation of the 7th Pay Commission.
First Published on May 31, 2016 07:55 pm