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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)

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