Gopal Krishna Agarwal, head of the Bharatiya Janata Party’s (BJP) economic wing, spearheaded consultations with representatives of 11 sectors and has handed over three sets of suggestions to the finance minister as well as prime minister’s office.
Though a fiscal deficit roadmap is necessary, the needs of the economy change over time. The fiscal deficit target “cannot be treated as sacrosanct”, says Agarwal in an interview with Sputnik.
Sputnik: For the first time, a political party has held widespread consultations on the budget. So much so, that political observers say BJP is holding a parallel budget-making exercise. What sort of consultations were held and what feedback was received?
Gopal Krishna Agarwal: The Indian economy is facing challenges on multiple fronts. The party and the government understand those challenges. We have deeply worked on the current needs of the economy. More than a statement of accounts, the budget is also a policy statement.
BJP has a big outreach and connect with the public at large, having a base of 160 million members across the country. Members keep approaching the party at various levels about their expectations, and suggestions ahead of the budget.
We wanted to organise this effort. So, we have met people, taken feedback, and submitted three reports to Finance Minister Nirmala Sitharaman based on the feedback and suggestions from the people we met.
Sputnik: So, who did BJP meet exactly? And how were these meetings distinct from the consultations that the finance ministry or the PMO usually has ahead of the budget?
Gopal Krishna Agarwal: We identified 10 sectors for stakeholder consultations ahead of the budget along with one meeting with experts on macro-economy. So, 11 such meetings were held. These sectors belong to three broad categories. First, being India’s sunrise sectors, which have lots of prospects. Secondly, those sectors that are facing problems were part of the deliberations.
The sectors having potential for growth and job creation belonged to the third category. About 15-20 organisations, from each sector, were part of consultations held by the BJP. Three representations based on the deliberations have been submitted to Ministry of Finance as well as prime minister’s office (PMO).
Sputnik: Which sectors were invited for deliberations?
Gopal Krishna Agarwal: Consultations have been held with professional associations of cost accountants, insolvency professionals, chartered accountants, among others. These have been held with the agriculture sector, automobile, pharmaceutical, heavy industries, telecom, and micro and small enterprises, among others.
Sputnik: What was the most important demand of the various industry and economy segments that BJP met ahead of the budget?
Gopal Krishna Agarwal: Sectoral representatives were unanimous about the fact that the government expenditure has helped the economy. At present, private investment is not happening and is a big challenge. Private investment will happen only when there is consumer demand. Rate cuts will not induce private capital formation. So, the consensus was that government expenditures should continue.
Secondly, people said that there is an urgent need to create wealth in the rural economy. Thirdly, an important demand was to address the liquidity problem of the non-banking finance companies and slow rural growth.
Sputnik: What’s causing distress in the rural economy? What should be the strategy for it?
Gopal Krishna Agarwal: At the time when India just gained independence, 90 percent of the population was dependent on agriculture, which contributed 50 percent to the Gross Domestic Product (GDP). Today, 55 percent of people are dependent on agriculture, while the contribution to GDP is 13 percent. Those displaced from agriculture did not get adequate space in the manufacturing sector. To boost the rural sector, social entitlement schemes need to be strengthened.
Sputnik: The government already announced corporate tax cut in September last year. Were there any further demands on the tax front in the deliberations held by the BJP?
Gopal Krishna Agarwal: People were confident that the government will be able to address the economic slowdown. One significant point was raised on a Free Trade Agreement (FTA). A common complaint had been the problem of inverted duty structure in FTAs. While finished products are being imported at low import duties, the duties on raw materials is higher. Industry is extremely worried about FTAs.
Sputnik: Don’t you think that the average man too is expecting relief from the government on personal income tax?
Gopal Krishna Agarwal: The real need is for liquidity at the bottom of the pyramid. In our deliberations, industry demanded correcting the NBFC credit line. Addressing the NBFC liquidity crunch will help consumer demand, and retail financing.
Sputnik: Will there be any relief on personal income tax front for the common man in the budget?
Gopal Krishna Agarwal: It is not that tax relief has not been provided by the government to the common citizen of the country. A number of relaxations have already been given to individual taxpayers in previous budgets. Along with a tax rebate last year, standard deduction was increased and a part of investments in real estate have been made tax free in the previous budgets. We have done a lot on the personal income tax side.
Also, only 18 goods are now under the highest slab of 28 percent in Goods and Services Tax (GST). And overall tax incidence under GST has come down significantly from the tax burden in earlier systems. This ultimately comes as a benefit for the common man.
Sputnik: India’s growth is down from 8 percent to 4.5 percent. How big a challenge is this ahead of the budget?
Gopal Krishna Agarwal: The country’s GDP depends on many factors including the global economic scenario. The US-China trade tensions have impacted India. However, the Indian government is trying to address the domestic economic slowdown first. We acknowledge the fact that there is a need to create demand in order to give a fill-up to the economy.
A number of initiatives have already been taken, for example, the merger of public sector banks, lining up $1 trillion infrastructure in five years, among others. The unanimous view is that the government needs to continue spending. That said, all of this cannot be addressed in one budget. It is an ongoing process.
Sputnik: Will higher spending by the government not impact the quality of the fiscal position? India has already faced a lot of criticism on “credibility” of fiscal numbers by agencies like the International Monetary Fund (IMF). What will the government choose , in your opinion, growth or fiscal discipline?
Gopal Krishna Agarwal: A fiscal deficit is the outcome of whatever the government policy is. Policies pertaining to economic development, and growth have to have a larger picture than just sticking to the fiscal target. The government is very transparent on fiscal deficit numbers, but all its efforts cannot remain within the boundary of a number. There are for sure off budget items like oil bonds and food subsidies, and the government has never hidden them.
But treating fiscal deficit targets as sacrosanct would mean curtailing expenditure and compromising the needs of the economy. The need of the hour requires a strategy on growth and fulfil the needs of the economy. There is no urgency to restrict the fiscal deficit to 3.3 percent of GDP. However, there is a need to have a plan on fiscal consolidation. Countries like the United States run wide deficits.
