(This story originally appeared in on Feb 18, 2021)

Principal economic adviser in the finance ministry Sanjeev Sanyal says the Budget lays out a credible, clear path for fiscal consolidation. In an interview to TOI, he says the government is now in a position to go in for unapologetic privatisation. Excerpts:

The fiscal consolidation plan has raised concerns. Rating agencies think it may not be achievable given the challenges…

The rating agencies are welcome to their opinion. But as we have shown in the Economic Survey that on every objective measure India is under-rated by some margin, and while it is true that in the last one year there has been a big shock, it has also been the case that our economy is recovering the strongest of any of them.

So, if they do have concerns, they will be looking at some of the impact that is happening on the world at large and not just in India. Second, we are quite confident about the path of fiscal consolidation and we were very responsible throughout the entire phase. We went against the advice of many leading global economists who wanted us to do a large upfront stimulus at that time and we instead have been much more responsible and conservative.

Now that the economy has opened up and the supply side is in a position to respond to the demand push, there is a case for going for a public investment-driven revival. Again, the Economic Survey shows that even on a fiscal consolidation perspective, this is a sensible thing to do because the fiscal sustainability depends ultimately on the difference of your borrowing cost and your nominal GDP growth rate. Even the most conservative number, which is actually the one in the Budget, of 14% GDP growth in nominal terms, is way above our borrowing cost of 10 years, which is 6%. I don’t think there is any case for not taking the opportunity to borrow and spend and to rebuild demand at a time when by all indicators inflation is not a major concern, global capital is available. As far as the longer term consolidation is concerned, numbers in the Budget are very, very responsible. They are transparent and clear and we have clearly not tried to do anything that is not credible.

The Budget relies a lot on privatisation. What is the plan B in case the situation turns adverse in future?

During last one year or even more, things were not conducive to do privatisation. This was not due to lack of intent, the conditions were wrong. But, conditions have now become much better for doing privatisation and we have clarified the plan. A lot of work has gone into trying to figure out how the process will be. We are now in a position to go for an unapologetic privatisation drive.

When do you see private investment picking up?

Bringing back animal spirits is an important part of what we are trying to do and in the longer run, private investment, private innovation, private risk taking is what our economic model of growth is about. There is no question that bringing back those animal spirits is an important aspect and you can see we sharply lowered corporate tax rates and we have not tinkered with it, despite a lot of international experts being of the opinion that they should be done, but we have not tinkered with it. Instead, we have gone for expenditure of a particular kind, which is crowds in the private sector because we are creating infrastructure of various kinds.

It may be soft infrastructure, hard infrastructure — but both of them are beneficial ultimately to the private enterprise as they create the backbone for them to take risks and innovate. I think conditions are good, they also fit together with the fact that GDP growth in India is going through a V-shaped recovery and you don’t need to even look at the statistics. It’s pretty obvious just looking around you that demand has come back very strongly. If there is any one country in the world where this revival is happening strongly, it is India.

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