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  • No Conflict Between Fiscal Consolidation and Public Spending, Says Bimal Jalan - Business Line PDF

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    Aju Sam Sunny
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    Former RBI Governor says there is no conflict between fiscal consolidation and public spending. The more important issue is where the spending takes plac, says Former RBI Governor. He says Fiscal Responsibility and Budget Management Act should not include quantitative goalposts.

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    Former RBI Governor says there is no conflict between fiscal consolidation and public spending. The more important issue is where the spending takes plac, says Former RBI Governor. He says Fiscal Responsibility and Budget Management Act should not include quantitative goalposts.

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    13 views2 pages

    No Conflict Between Fiscal Consolidation and Public Spending, Says Bimal Jalan - Business Line PDF

    Uploaded by

    Aju Sam Sunny
    Former RBI Governor says there is no conflict between fiscal consolidation and public spending. The more important issue is where the spending takes plac, says Former RBI Governor. He says Fiscal Responsibility and Budget Management Act should not include quantitative goalposts.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    09/02/2016

    Noconflictbetweenfiscalconsolidationandpublicspending,saysBimalJalan|BusinessLine

    BLInterview

    Noconflictbetweenfiscalconsolidationandpublicspending,saysBimalJalan
    Surabhi

    BIMALJALAN,HeadofExpenditureManagementCommission&formerRBIGovernor

    FormerRBIGovernorsaysthemoreimportantissueiswherethespendingtakesplace

    FormerRBIGovernorandheadoftheExpenditureManagementCommissionBimalJalanbelievesthatthereisno
    conflictbetweenfiscalconsolidationandpublicspending.Themoreimportantissueiswherethespendingtakesplac,
    hesaidinaninterviewwithBusinessLine.Jalan,whoislikelytosubmitonelastreportontheexpenditure
    managementreformsbytheendofthismonth,saidthatFiscalResponsibilityandBudgetManagementActshouldnot
    includequantitativegoalposts.Excerpts:
    Whatisyourviewonthefiscalconsolidationversuspublicspendingdebate?
    Thereisnoconflictbetweenthetwo.Themoreimportantissueiswherethespendingtakesplace.Wehavetwohigh
    priorityareaspublicinvestmentsanduseoftechnologytotransfersubsidiestothepoor.Inmyview,thefiscaldeficit
    wehavenowisinveryreasonableshape.Itismoreimportantthatfiscaldeficitiswithinarange.Adeviationof0.2per
    centto0.3percentisnotverysignificant,butsincetheFiscalResponsibilityandBudgetManagement(FRBM)Acthas
    prescribedit,wehavetosticktoit.IftheFinanceMinistrydecidestoachievethegoalsofthesocietyinanon
    inflationaryenvironment,itcanamendtheAct.
    Giventhatsuccessivegovernmentshaverelaxeditsgoalposts,howsacrosanctistheFRBMAct?
    ThereisnothingwrongwiththeFRBMActperse.ButIfeelthatweshouldnotfixaquantitativefiscaldeficittargetsin
    theAct.LeaveittotheFinanceMinistry.Whatwewantisthreedifferentgoalsthroughourfiscalmovesinvestment
    andjobsgrowthinvestment,growthalongwithfinancialstability,andrelativelymoderateinflation.
    AllthesegoalshavetobeachievedandthebalancehastobestruckbythegovernmentratherthanprescribedinanAct.
    HastheExpenditureManagementCommissionsubmittedallitsreports?Doesthepanelsupport
    DirectBenefitTransfertorationalisespending?
    OnemorereportwillcomeinbeforeoraroundtheBudget.NobodycandisagreewithDBT.Wehaveagreatadvantage
    accesstomobilephonesandidentificationthroughAadhaarcard.Sowecanmaximisetransferofbenefitsthrough
    DBT.
    Whatisyourviewonthehealthofthebankingsystem?Manyinternationalratingagencieshaveraised
    concernsoverit.IstheIndradhanushschemesufficient?
    Thebankingindustryisingoodhealthasitismadeupofmostlypublicsectorbanks.Theissueishowdoyoumakethe
    bankingsystemperformasperruleslaiddownbytheRBI?Indianbanksfollowallinternationalnorms(Basel)on
    http://www.thehindubusinessline.com/moneyandbanking/noconflictbetweenfiscalconsolidationandpublicspendingsaysbimaljalan/article8210137.ece 1/2

    09/02/2016

    Noconflictbetweenfiscalconsolidationandpublicspending,saysBimalJalan|BusinessLine

    capitaladequacyratio.Sothisisachievable.
    Idontaccepttheviewofinternationalratingagencies.Thereisnoproblemasfarasprivatebanksareconcernedand
    thepublicsectorbanksaresovereign.OurfiscaldeficitislowunlikeLatinAmericancountrieswherenonperforming
    assets(NPAs)arelargeandfiscaldeficitsarehuge.Ourfiscaldeficitisinline,inflationismoderate,sothereisno
    problemincopingwithNPAs.
    WhateverisbeingdonethroughtheIndradhanushschemeisagoodmove,Idontknowifitisenough.
    Thegovernmentitselfhasannouncedthatitwouldtakecareofthebanks.Thebankruptcylawwilltakecareof
    defaulters.Bankcreditisnotsomethingthatcanbeoverleveragedbycorporateorpublicsectorenterprises.
    (ThisarticlewaspublishedonFebruary8,2016)

    http://www.thehindubusinessline.com/moneyandbanking/noconflictbetweenfiscalconsolidationandpublicspendingsaysbimaljalan/article8210137.ece 2/2

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