This is not just the Centre’s budget — the top priority this year is for every state to have that cushion, the FM said.
Sitharaman compared this year’s budget exercise to a string that has the right degree of tautness — not too loose, not too tense, but just right.
The budget has kept all the three layers of elected governments — Centre, states and the panchayats — in full focus as part of an effort to push inclusion, the FM noted.
Buffers are being put in place to safeguard the economy in the event of another Covid-like blow, she said. The buffer on the expenditure side is efficiency in disbursal, and the one on the revenue side is plugging loopholes in revenue generation and cutting down avoidance.
There are many cases in India where people use the tax exemption not for the purpose they were meant for, but for investing and earning extra income, the FM pointed out.
Such instances need to be reduced, and the government is making efforts to make sure that the practice of blatantly staying out of the tax system is not encouraged, she observed.”And how do you arrive at blatant staying out? There are very clear signs of the affordable levels at which you are, or well above the affordable levels, and therefore we want to… So these are conscious steps taken for India to generate right revenue, legally claimable revenue and timely revenue,” Sitharaman underlined.
The government is being realistic in this budget in terms of projected revenue generation, Sitharaman asserted. According to her, among other things, his also sends the right message to income tax field formations not to go after big numbers. When tax guys chase big targets, it creates scope for harassment, which is something that the government does not want, the FM said.
It is easy to spell out fancy numbers in the budget, but it is the same government that has to answer for these numbers a year later, Sitharaman observed.
The sharp rise in capex outlay is aimed at bringing the multiplier effect into play, Sitharaman said. This is what works for India in terms of getting money in the hands of the people, she added.
For finding the right number of multipliers and sustaining these over the short and medium, a rise in capex outlay is the best best, the finance minister noted.
On a question if the raised capital outlay could lead to inflation, Sitharaman termed it a tenuous argument in the context of an economy like India. Capital expenditure per se is not money flushing into the system, she said. Money thus spent is going into purchasing goods that are ‘core goods’ for the economy; this is not ‘imitative’ or ‘flamboyant’ expenditure, she added.
According to the FM, the government is creating demand for core sector products through capital expenditure, which in turn creates employment, which puts money in the hands of the people, which in turn generates demand.
“They in turn bring in demand for basic core living, which could be perishable goods and basic food items, which could be essentials of FMCG and so on. The chances of a capital expenditure spike leading to an inflation is a bit tenuous because it brings in supply together with demand,” the finance minister said.
Responding to a question on if states have a lot to catch up, the FM states have shown very good appetite for capital expenditure and they are receiving the amounts given very well.
“But to be fair to them, that component of this capital 50-year loan that we give them which comes with conditions is where many of the states are finding it difficult to move ahead, fulfilling those conditions and therefore the 20% amount of that one lakh goes slowly, not as much as the other 80% goes. So that is where the difficulty is. It is not a lack of appetite,” she said.