'People see gains, are more supportive of privatisation'

Niti Aayog vice chairman Rajiv Kumar during an interaction with Surojit Gupta & Sidhartha says the growth assumptions in the Budget are conservative while identifying the geo-political situation and withdrawal of liquidity as critical risks. Excerpts:

Do you expect the privatisation process to gather momentum this year?

Given the experience with loss making entities such as Air India, the public now understands the need for greater efficiency in public sector enterprises and therefore, is supportive of their privatisation. We have changed the word from disinvestment to privatisation and not one voice in opposition has come. People know now that if this money is available to them instead of being used inefficiently in public sector units it can be used for better delivery of public services. Their confidence has increased because delivery of public services has improved. Therefore, in the coming months, privatisation will gather further momentum and the target for 2022-23 will be overachieved.

Do you think the Budget assumptions are a gamble on growth? What are the risks?

It is not a gamble. Gamble is where there is an equal probability of failure and success. There is a much higher probability of success, in terms of starting the virtuous cycle.

The other focus of the Budget is on sunrise sectors, frontier technologies and inviting the private sector to participate in that. The government's role is to create opportunities for private investment.

What're the downside risks?
One is the pandemic, who knows about the future trajectory? The second is the global economy. What would be the consequences of the withdrawal of the huge amounts of liquidity which will now start. More than $13 trillion were added to central bank balance sheets and now these balance sheets are going to be shrunk. The world economy has never seen this kind of a situation. I don't see global commodity prices being sustained at these high levels because if global growth slows and demand comes down, commodity prices should soften. That's why the subsidy in the Budget is being reduced. The third downside risk is the geo-strategic risks. What happens in Yemen? What happens in Ukraine. Both areas are energy centres.

Do you think a tax cut would have helped in accelerating recovery?

I don't think direct taxes need to be lowered. It is not ideal to end up with an adverse ratio between direct and indirect taxes as that will be regressive. The minimum taxable income that we have is Rs 5 lakh and our per capita income is about Rs 1.25 lakh. In almost every country taxable income and per capita income is 1.5 to two times.

We keep demanding that we increase the tax base. But how can it increase if you cut rates? If we don't increase the base how can rates come down? All the money that is being spent is for improving services which also helps the middle class. Once you improve health, education and infrastructure then you can think of UBI (universal basic income).

Is there recognition that we should not restrain our spending due to the fear of the fiscal deficit?

It's a good direction. Your fiscal policy has to be counter cyclical and that's the simple rule. Counter cyclical to the extent required and not dictated by rating agencies. Along with this you have to increase the share of private debt in the economy. Every country since 2008 has driven growth on the basis of an expansion in private debt.