India’s expenditure secretary T.V. Somanathan, a 1987 batch civil servant, had the tough task of allocating resources in the budget under the pull and pressure of various central government ministries. In this interview, Somanathan explains the rationale behind the budget allocations. Edited excerpts:
While the central government has used an escape clause to expand its fiscal deficit, don’t you think states should have similar options to borrow more from the market to support the growth efforts of the Centre?
The FRBM laws of the state are different from the FRBM law at the Centre. This is an issue which we have not considered. The finance commission will have to give its input on that. To the best of my knowledge, they have not made any recommendation to that effect in their interim report. We go by the content of the Act. Problem is we are all borrowing from the same pool of funds. Adding another 0.5% will be a pressure on the bond market and there will be crowding out effects. It is something that I am not able to pronounce on at this moment.
Don’t you think reducing expenditure in FY20 compared to BE is counter-productive, because we are trying to push for growth in the next fiscal year?
Our aim has been to maximize the expenditure subject to not being fiscally imprudent. These are limits that we were able to attend without crossing the limits that we would consider to be imprudent and create long-term problems. It may have been desirable in the short term, but it would have created long-term issues. We are trying to make sure that we don’t do something that is bad in the long run.
The government is claiming to have saved big money through the use of the Government e-Marketplace, or GEM, platform and the Direct Benefit Transfer system. Why are those numbers not reflected in the budget documents?
The numbers have not specifically been given in the budget because those numbers are estimates based on prices paid through GEM and prices paid outside GEM. They are not reflected in the budget, but those are very credible estimates. Similarly on DBT, reduction in the revised estimates of PM-Kisan itself is a testimony and success of Aadhaar-based identification of beneficiaries, because original estimates were based on multiple data bases in the states, saying that there are so many people. But when the actual distribution was done with Aadhaar authentication, a lot of de-duplication took place.
So, are you saying it’s not under-utilization of PM-Kisan rather de-duplication why the revised estimates in FY20 is less than the budget estimates?
PM-Kisan revised estimates reduction is partly due to de-duplication and partly because the number of beneficiaries have been smaller than estimated.
Do you mean to say without savings on GEM and DBT, fiscal deficit would have been much higher in FY20?
DBT savings happened across the board. Fiscal deficit would have been higher without the DBT scheme. GEM’s savings are usually deployed on more expenditure of productive nature. If I buy things cheaper, does not mean I surrender the money. I buy more of those things. I get more value for money, it does not necessarily have a budgetary impact.
Does the government consider the expenditure on the Mahatma Gandhi National Rural Employment Guarantee Scheme wasteful and unproductive?