Dynamism comes with participation of private sector

The Central government, with it's the Economic Survey and the Union Budget, is passing on the baton of development to the private business sector. The Union Budget, hailed by many as a bold statement, is seen as a major jump start for the revival of the economy of India. Dr S P Sharma, Chief Economist and Director of Research, PHD Chambers of Commerce and Industry, spoke with Bizz Buzz on the unemployment rate in India, the GDP projects for the next financial years and the importance of business segment for the much-needed boost required for the economy

The private sector has to come forward to create resources and to create employment opportunities in the system because the government cannot provide jobs to everyone. So, the private sector has to become more and more lucrative in terms of increasing the investments in the country and creating job opportunities

Now we have each and every opportunity to progress to become more lucrative and be visible in the global charts. We have undertaken lots of reforms during the last eight to nine months in each and every segment. Majorly, reforms are on the supply side

The government's Budget has been hailed as bold by industry experts. What is your take on the overall approach?

The Budget is growth-oriented, demand-boosting and investment-inducing. Overall, I am very positive on this Budget because this is a policy document for not just for the current year but also roadmap for the next many years for India to become Atmanirbhar, self-reliant, to move forward and become more competitive in the domestic and international market, with a lot of support in each and every segment of the economy.

Unemployment remains at an all-time high in India at present. But Budget doesn't seem to have addressed this key issue. What is your take on this?

Budget cannot provide figures that employment is going to improve. It can provide facilitation to create employment opportunities in different areas, which has been provided that lot of employment will be created because of allocations for infrastructure, manufacturing and small businesses. All these segments will create employment opportunities for the growing young population. So, employment is created on broad-based development of the country. Employment cannot be created by the numbers; it comes from the sectors. The government is doing a lot for different sectors and each and every sector has been focused for the growth opportunities, employment creation and to contribute more on the economic system.

The Economic Survey made special emphasis on digitisation across sectors, but the Union Budget hasn't made any significant announcements regarding the same

I think digitisation is a take of the sectors. If we look at the education sector or the health sector or any other sector of the economy is going to adopt more of digitisation. That is their individual approach. The government in totality, has focused on digitisation and in the last so many months, since the coronavirus, there has been a shift of focus on the digital system.

The government made it clear that it will give a greater push to the business sector and privatisation. Will this translate into reality in the long run?

Now the private sector has to come forward to create resources and to create employment opportunities in the system because the government cannot provide jobs to everyone. So, the private sector has to become more and more lucrative in terms of increasing the investments in the country and creating job opportunities. Because dynamism comes with the participation of the private sector. So, the government is keen to provide the opportunities to involve private sector as a major growth vehicle to progressively move ahead.

The Centre could not meet its disinvestment target in this fiscal but set a high target for next financial year. Will it be able to achieve its goal?

The current financial year was significantly impacted by the Coronavirus pandemic and each and everyone was affected by it, and there was no, I believe, interest for the disinvestment. But now, this is the method for good times. We were in the bad times in the current (2020-21) financial year's first three quarters. Now, moving forward, we have again gained the momentum and the markets are making new and new highs each day. So, I believe this is a good time, the most opportune time for creating resources and to move forward with the asset sale, and in the shape of disinvestments.

What kind of GDP growth do you see post the Budget announcements?

Now we have each and every opportunity to progress to become more lucrative and be visible in the global charts. We have undertaken lots of reforms during the last eight to nine months in each and every segment. Majorly, reforms are on the supply side. We have intact supplies, but our capacity utilisation accordingly is not happening because demand is not there in the system. Demand is not matching the supply. So, the government is now trying to create more and more demand so that capacity expansion, capex cycle is again coming in the system and private investments are happening. With this, I believe, there will be great equilibrium between demand and supply and the economy will be in its potential growth trajectory which is anticipated at 11 per cent for the coming financial year.

Do you see any rise in consumer spending in the new financial year?

Yes, I am looking at the charts. The government is doing a lot for the informal sector. The informal sector too has to come forward to create employment opportunities and create more and more demand in the system. The government is majorly focused on providing the relief to the unorganised and the informal sector, which was significantly impacted by the pandemic. The government is doing a lot for the farm sector also in the form of Direct Transfers in their accounts. So, the consumer spending will re-emerge from here to support the economy and create the demand in the system. This, I think, is becoming visible also in some segments like instance passenger vehicles sales being intact, a major reflector of the demand side economics.

The Centre has set a target to reduce the fiscal deficit to 6.8 per cent of GDP next financial year and to 4.5 per cent by FY26. Are these feasible targets, given the Covid crisis?

Yes, because we are now moving forward with the counter cyclic, expansionary fiscal policy which is also needed in the difficult time, such as Covid. And when you are facing the difficult times, you move forward with the expansion of the resources in terms of debt and you try to support the system. So, that has also been adopted by the government, now the counter cyclical fiscal policy is very much needed and I believe if the growth is becoming intact, if the growth is moving forward then the fiscal deficit to GDP ratio will automatically become comfortable because now what is happening in our GDP is decelerating but expenditure by the government is raising. If you saw the Economic Survey of 2021, government expenditure has increased from 12 per cent to 14 per cent of the GDP. That is natural that if the government spending is increasing, but the GDP is contracting rather than expanding, so the ration of fiscal deficit to GDP will be higher. In the same sense, if our growth trajectory is expanding and GDP is moving in the higher course, then the fiscal deficit will become comfortable and will be in the lower trajectory.

The Centre also increased capex spending by over 34 per cent for FY22. Where will it get the funds from?

The government is trying to create more Development Financial Institutions (DFI) and they have focused on the same. The growth is reflected in the Budget announcements and the government is now relying on the funding from the borrowing segment. So that's why the government is trying to create more physical infrastructure in terms of capital expenditure, which has increased significantly as compared to previous years.

The government, if you see, is also focusing on rural infrastructure, more urbanisation, and increasing employment opportunities in the housing and construction sector.