Subhash Chandra Garg- Economy, Finance and Fiscal Policy Strategist

  BUDGET 2021-22 PRIVATISATION PUSH AND SETTING UP A DFI- A DECISIVE TURN FOR ECONOMIC POLICY REFORMS 3.0?   SUBHASH CHANDRA GARG Economy, Finance and Fiscal Policy Strategist and Former Finance Secretary, Government of India   Bold Privatisation Push Government had announced its intention on 18 th May 2020 to formulate a new coherent Public Sector Enterprises Policy to push reforms in central public sector undertakings (CPSEs). Principal pivot of the policy was to retain a maximum of four public sector companies in ‘strategic sectors’ and privatise every other CPSE. While it took some time for the Government to formulate this policy, the Budget Speech 2020-21 outlined the policy. The policy covers existing CPSEs, Public Sector Banks and Public Sector Insurance Companies . Principal elements of the Policy are: a.     Strategic sectors defined to include- i. Atomic energy, Space and Defence, ii.   Transport and Telecommunications, iii.   Power, Petroleum, Coal and oth

  BUDGET 2021-22   CLAWING BACK FINANCE COMMISSION DEVOLUTION FOR FUNDING AGRICULTURE INFRASTRUCTURE   Subhash Chandra Garg Economy, Finance and Fiscal Policy Strategist; Former Finance Secretary, Government of India     Finance Commission Recommends Continuation of Share of States in Central Taxes at 41%   The15 th Finance Commission recommended “retaining the vertical share of 41 per cent of the divisible pool of taxes for the States during the award part of this Commission”. This meant continuation of the share of States in the central taxes as recommended by the 14 th Finance Commission. The 15 th Finance Commission reduced the share of States from 42% to 41% to adjust for the share of J&K, which had become two union territories.   The “divisible pool” is the critical part of the recommendation. The Article 270 of the Constitution, after the 80 th Constitutional Amendment defines the divisible pool. Article 270 prescribes that “all taxes and duties

  BUDGET 2021-22 BIDDING GOOD-BYE TO OFF-BUDGET BORROWINGS AND FRBM LAW     Subhash Chandra Garg Economy, Finance and Fiscal Policy Strategist; Former Finance Secretary, Government of India   Speaking eloquently about the sequential improvements in the efforts of the Government about disclosures for the off-budget borrowings, Finance Minister proposed “to discontinue the NSSF Loan to FCI for Food Subsidy”. In the details of extra budgetary resources, commonly called off-budget borrowings given at the annexure VI of the Budget Speech, there is lesser issuance of ‘fully serviced bonds’ (Rs. 31,459 crore in FY20-21RE against Rs. 49,500 crore planned in BE20-21- actual in FY19-20 only Rs. 22006 crore) and lesser lending from the National Small Savings Fund (NSSF) to fund revenue expenditure of government, (Rs. 94,636 crore in RE20-21 against planned Rs. 136,600 in BE). For the FY21-22, there would be no issuance of fully serviced bonds and the funding from NSSF would also be

  BUDGET 2021-22 HIGHER CAPITAL EXPENDITURE IS OPTICAL ILLUSION   Subhash Chandra Garg Economy, Finance and Fiscal Policy Strategist; Former Finance Secretary, Government of India     Finance Minister highlighted, in her budget speech, a massive increase of 34.5% in the capital expenditure budget estimates of year 2021-22 (BE21-22) to Rs. 5.54 lakh crore from Rs. 4.12 lakh crore in the budget estimates of 2020-21 (BE20-21). The revised estimates (RE20-21) of capital expenditure for the FY20-21 have also gone up to Rs. 4.39 lakh crore, recoding an increase of 6.55%.   An increase of Rs. 27,078 crore in the capital expenditure in the RE20-21 in the covid-19 and lockdown impacted year when the GDP is likely to see a contraction of 7.5-9.0%, even though it is only 2.57% of the increased fiscal deficit of Rs. 10.52 lakh crore, should be a cause of celebration for sound fiscal management (theory: capital expenditure is better fiscal expenditure) and imparting right investme