‘Growth Allows Spending With Fiscal Prudence’

The deputy chairman of the Planning Commission, Montek Singh Ahluwalia, spoke to Outlook soon after the budget. Excerpts:

What does the step-up in demand for stimulus and increased government spending really mean for India’s long-term financial planning?

The key thing is that we should be able to finance essential developmental expenditure while also being fiscally responsible. The budget has outlined a reduction in the fiscal deficit for the current year and a further planned reduction thereafter. The government is clearly signalling that it is committed to a path of financial prudence.

There is a continuing demand for increased government spending.

There is nothing wrong with that. The economy is going to grow at 8 or 9 per cent in real terms; revenues are going to grow even faster. A growing economy provides room for growing expenditure, so it’s perfectly possible for expenditure to increase and fiscal deficit to go down if we are generating a lot of revenues. A problem does arise if you commit yourself to expenditure and you don’t get growth and revenue. Then you have to make some mid-point corrections. At the moment, the budget is predicated on the assumption that we are going to grow, and growth looks good.

Is this tightening of belt working to the disadvantage of the aam aadmi?

Definitely not. I think we have got a very reasonable plan allocation and the ministries should now focus all their energies on implementation.

This year, only Rs 1,000 crore additional allocation has been made for NREGA. Has the demand for NREGA reached a plateau?

It is a very important programme. While there are problems of implementation, on the whole, we can be quite happy with what has happened in most states. As for the modest increase in allocation for 2010-11, you should not assume that everybody who gets a job card will actually demand 100 days of work, the maximum allowed. At the moment, what we have got is 45 days of work on average for those who actually report for work. In a normal year, they may need less...the Rs 1,000-crore increase only reflects that we don’t expect the demand to be very high, but I don’t think anyone needs to worry because if they want work, they will get it.