Ideas For Budget 2024

INDIA HAS A COALITION government at the Centre after a decade. The Narendra Modi-led NDA government has taken charge with the BJP keeping all key ministries, including defence, home and finance. What can one expect in the first-ever coalition Union Budget under third-time Prime Minister Narendra Modi? What could be the pulls and pressures of laying a Union Budget in a coalition government?

Fortune India conducted a pre-Budget discussion with some of the brightest economic minds on what to expect in the Budget from Modi 3.0. The panel comprised Subhash Chandra Garg, former finance and economic affairs secretary, Government of India, and chief policy advisor, Subhanjali, an advisory firm; Ashwani Mahajan, national co-convener, Swadeshi Jagran Manch; Suneeta Reddy, MD, Apollo Hospitals; Amitabh Dubey, in-charge, research and monitoring, All India Congress Committee (AICC) communications department; N.R. Bhanumurthy, vice-chancellor, Dr BR Ambedkar School of Economics University, Bengaluru; and Shankar Sharma, founder and CMD, First Global. The discussion was moderated by Rajeev Dubey, Editor-in-Chief, Fortune India. Edited excerpts:

What does coalition politics mean for the Indian economy, reforms, and geo-strategic initiatives?

Ashwani Mahajan: In the last 10 years we have seen growth with stability and the investment-led model. Growth and welfarism go hand in hand. You can’t ignore people at the bottom of the pyramid. We had been thinking about reforms such as opening up the economy, FDI, FPI, and so on. But that doesn’t mean reform. We have been dependent on Chinese imports for a long time. Between 2004 and 2014, we saw 30% growth in Chinese imports. That required a change in track. We had ‘Make in India’, but that could not be very successful. However, Atmanirbhar Bharat is producing results. There has been accelerated investment in the last three years.

Capital expenditure (capex) during the UPA regime was much lower than under the Modi government. At the same time, welfarism also happened. All 10 points of the multidimensional poverty index were targeted. It was a period of growth, welfare, and reduction in poverty. The fact that 27 crore people came out of multidimensional poverty is not a small thing. The period was a big leap forward.

Amitabh Dubey: Coalition governments have been the norm for the most successful period of the Indian economy. The last 10 years were an aberration. Even though promise and rhetoric were high, delivery of reforms was not different from the coalition era. What you did see was marketing, image building and promises. But actual delivery was a gradualist model.

We had huge announcements on privatisation, moving towards an investment-led model. To some extent it was delivered and consumption lagged, but the politics of welfarism continued. This will not only have a huge impact on India, it is going to be better. With power concentration, we saw erratic decision making — demonetisation, GST being rammed through, and lockdowns at short notice. These will not happen in a functioning coalition, so, it will be a smoother policy making environment. It will be healthy for the country.

As far as India’s place globally is concerned, Prime Minister Modi did bring energy and personalisation to diplomacy, but it is due to India’s standing, a result of decades of work, economic growth, and expansion.

N.R. Bhanumurthy: We need to take time to assess what happened and what determines the election outcome. Post 1990, we have seen mostly coalition governments, and significant reforms. We are among the fastest-growing large economies. You need to give credit to all governments since the 1990s, and as professor Suresh Tendulkar said in his book, Understanding Reforms, we took two steps forward and one step backward. So, we are moving ahead. Coalition governments depend on the nature of the coalition. We might say UPA I was better than UPA II. All these reforms were written in the 1990s. Some low-hanging fruits have been achieved, but tough reforms are needed. We talked about financial inclusion for 60-70 years. The Jan Dhan Yojana brought transformative change in how banking has penetrated rural areas.

Do you think the coalition government will harm or hurt any of that?

Bhanumurthy: It’s going to be continuity with change. In the last decade, if you had coalition pressure within the government, you may not have seen demonetisation or how policies were pushed — GST or the Insolvency Code where it's still work-in-progress.

We have seen many versions of reforms in the last six-seven years. The government needs to focus on public expenditure efficiency. We’re going forward instead of just talking about allocation. There are two areas: One is how the NPA crisis was handled. From the global financial crisis to the recent period, India has had a stable financial market. But all governments neglected the role of statistics. For any policy, statistics becomes the heart and soul of implementation. You may talk about ideas, but if you don’t have grass-root level information and statistics, it will hamper growth.

Shankar Sharma: During 2014-20, we had tepid growth. The last data in 2019-20 prior to Covid was just 3.9% GDP growth, way below what trends in India. It was not something seen for the last 20 years barring 2008. Since Covid, real GDP numbers have gone up. Why have real GDP growth numbers changed between 2014-20 and 2020-24? The answer is simple. Look at India’s public debt-to-GDP numbers starting 2004. India was at about 90% public debt-to-GDP that came down to 65-66% in 2014. From 2014 we have gone back to 85-90%. The build-up happened in the last four-five years. Second, our fiscal deficit, which was around 3-4%, has now been normalised to 5-6 % in recent years.

We needed to pump-prime the economy due to Covid, but running 90% public debt-to-GDP and 6% fiscal deficit cannot be called fiscally prudent. The market has been made to understand that we will ratchet it down in the fiscal glide path to 5%, and then 4.5% over the next few years. But, capex-led growth over the last four years is what China followed. Japan followed it in the 90s. It always ends badly without exception. That’s because you end up building very high public debt-to-GDP and very high fiscal deficits. So, when you want to ratchet down the deficit, growth collapses because you don’t have enough firepower to keep pump-priming the economy.

We saw good GDP growth numbers because of high fiscal deficit and sharp build-up in public debt-to-GDP. The combined fiscal deficits of Centre and states and current account deficit (CAD) has hovered between 9-11% in the last 10 years. When we were called the fragile five in 2013, it was about 12%. That was the QE, taper tantrum year, in which everything collapsed because it was sudden tapering, and we were coming out of the 2008 crisis.

In the last 10-12 years, the stock market delivered 11-12% CAGR, below our long-term trend of 15-16%. The last four years since Covid have been excellent for stock market returns. But that came out of a high fiscal deficit. The deficit fuelled the market rally. But, can a market rally fuelled by high household debt deliver economic returns?

What should be the top three-four priorities while preparing the Budget?

Dubey: The GDP growth rate during UPA averaged 7.5%. It was recalculated to 6.8%, and under the Modi government it was 5.8%. Unskilled wage growth was 285% under UPA, 60% under NDA. Joblessness is 1-4 crore absolute numbers. Private investment was 27% during UPA and 20% in NDA. The bottomline is that private investment was considerably lower under this government, despite post-Covid recovery. Then there is the environment of fear. It leads to India’s honchos exiting the country and relocating to Singapore, London and New York. This is tied to the governance we’ve seen for the last couple of years. This is where the coalition is going to be very important.

It will be beneficial for private investment, because the environment around private investment will be more stable, safe and predictable. As for the Centre’s policies, there has been a clear distinction between the Modi model and what Congress and Opposition parties have been asking for. And we’ve seen this outside in investment and what’s happened to consumption and savings.

Household savings are at a 50-year low. Consumption growth is half of GDP growth, which is a big divergence from the historical trend where they have been much closer. We need policies to boost consumption and purchasing power.

Second, you need to focus on MSMEs. We’ve had too much focus on big business. Not enough was done for MSMEs. The CGTSME scheme during Covid-19 was not executed properly because banks were reluctant to lend to small businesses. This is where 90% of the jobs come from. We need a level-playing field with a focus towards consumption and small businesses.

Mahajan: Modi 3.0 is not going to be different. If you look at social welfare schemes, they are based on technology. I fail to agree with those who say private investment is not forthcoming. The government should continue with the PLI scheme, or, rather, extend it.

Rising imports from China have wreaked havoc on the Indian industry. This can be corrected only by pushing for investments. There is a narrative about rich Indians leaving India. They are much less than those leaving the U.K., China and other nations. Despite a few thousand people going out of India, the number of high net-worth individuals in 2015 was 2,36,000, and by 2022, the number had become 7,96,000. So, if a few thousand leave for personal reasons, it is not India’s growth story. There are two types of Indians: Those who believe in the growth story and are investing in it, and those who don’t and are going abroad. They have personal reasons to go; it is not because of the economy.

Bhanumurthy: The government needs to focus on 5 Ss — SMEs/MSMEs, States, Savings, Statistics and Structural Transformation. What the government plans overall for the next five years is much more important for businesses. The Budget is going to be presented only for the next nine months. Of course, there will be some kind of continuity, but the Centre needs to handhold states more than what they are doing now. They got the cushion from the RBI’s unexpected profits. They need to focus on ensuring more capex at the state level.

Of the allocation made to states, 99.9% has been utilised. It shows an absorptic approach. When we talk about this expenditure, we ignore the absorption capacity of governments.

Second is structural transformation for the long term. When you talk about employment and wanting to become the third-largest economy, you cannot do so with manufacturing accounting for 15-16% of employment. There is a need to increase manufacturing’s share to 25%.

We forget India is a savings-led investment growth economy. We don't depend on global resources. When you want to increase the investment rate to 35% a large part should come from domestic savings. Unfortunately, this is one area where the government is not really focused.

We also need to understand what determines private consumption. Right now, the biggest drag on consumption is GST. The way expenditures have positive multiplier effects, taxes have a negative multiplier effect. There are negative multiplier effects of GST on consumers. The GST Council looked to reduce it. Right now, it is not a revenue-neutral rate. Effective tax rates are higher than the revenue-neutral rate. So, GST should be brought down so that it drives private consumption.

Garg: The three main dimensions are: Expenditure, revenues, and deficit. There is a need to step up expenditure on the environmental side. We spend very little on pollution control, carbon emissions, and that makes quality of life poor. Second, we need a review of the capex system. Capex in railways is not yielding good returns. We must do some restructuring of how we run and finance railways. The entire management, financing, and capex of railways need restructuring.

On roads, we should bring back the Build Operate Transfer (BOT) model. Even if that means the government must fund 60, 70, or even 80% of the viability gap, it’s better than 100% financing by the government. On welfare, Modi 2.0 relied heavily on freebies — be it fertilisers, food, PM Kisan or others. We need a targeted delivery of welfare benefits on that side. We also need to revive privatisation and disinvestment programmes.

On the deficit side, we should go back to the FRBM Act. The formulation adopted in 2018 is fine. But 4.5%, even as a goal, is not a good idea. We can’t allow a debt build-up, and should have a new fiscal consolidation path for five years to bring the fiscal deficit down to 3% by the last year of the government. There is pressure on the debt side because nominal growth is much lower than what it used to be, thanks to lower inflation.

Suneeta Reddy: GST rationalisation, even though it’s not in this Budget, is something that needs to be considered because we have a range from negative to 28%, and in healthcare we’re negative, so there’s no set-off against all the input, credit, etc. Singapore has a standard rate of 7% and that is what we should aim for.

The second point is what we can do to improve investments in the environment. One point that was left out is skilling. For education, healthcare and skilling there are no incentives. There is PLI for manufacturing. And as you know, the services sector grew with the 10-year tax holiday. Incentives given to healthcare and skilling will increase revenues, GDP growth and export earnings.

The third point is that only 0.7% of GDP is allocated to research. We need incentives to make sure the private sector invests in research.

GST incentives such as PLI given to manufacturing are crucial to build healthcare infrastructure. Consumption has grown only 2.5%. So, what can we do to make sure people increase their per-capita consumption? Urban consumption is higher. In cities such as Hyderabad and Delhi, it is over ₹5,000. However, in rural Bihar, it is only ₹600. This is something we need to look at.

Also, tax slabs and exemptions have remained practically unchanged for the middle class. What can be done for the middle class?

Mahajan: We talk about improving the lot of the middle class. A big number is living at the bottom of the pyramid and we must be concerned about them, too. The middle class have been getting concessions. Those not taking rebates can move to the other tax system. But then, more needs to be done. The middle class is suffering because of job losses due to automation. We have to rationalise the use of AI and that can be done through fiscal measures. That is where the government should act. We need to make use of new technologies and new developments — be it robotics, automation or AI, but we have to make rational use of the same.

There should be some tax on artificial intelligence. Those using robotics and laying off people must contribute to the exchequer, so that the exchequer can help them find new jobs. These taxes are being talked about in other parts of the world. Secondly, tech companies that are taking away so much of their profits should also be taxed. So, if you are downloading an app, the money goes to the U.S. or other places and no tax is being paid.

On employment, some measures need to be taken to rationalise the use of AI in this or the next Budget.

What can be done to reduce income disparity?

Garg: There are three classes — the poor, middle and rich. The poor come from three segments — those who are not physically and mentally in a position to earn their living in old days, agriculture where there is a deep-seated low-income structure, and the informal sector where wages are very low. You need policies and programmes to address them. We have too many people in the farm sector. You have to enable farm labour to move out. It requires a different policy structure, including reforms in how we run agricultural subsidies and food procurement.

We need to identify real low-wage earners and a programme focused on them. On the middle class, it is better to leave them to their own devices. The government should give them a stable, low-tax structure. We need to raise slabs liberally to lower their tax burden. However, it is the rich that needs to be addressed. We need a wealth tax. Even a 1% tax will get you more than corporate tax. It will also reduce inequality.

Bhanumurthy: Andhra Pradesh’s outgoing chief minister recently said the government transferred ₹2.7 lakh crore in the last five years under various schemes, but he was not sure about the response of the people.

When the government starts intervening, there is no sunset clause. The government should see if they need to continue PLI or look for PLI in sectors where employment can be created. There is a mismatch in skills. We have a dearth of trained people but an oversupply of people in the labour market. We need to reduce the skill gap between demand and supply.

Since private capex was not happening, what option did the government have, but for fiscal deficit? Had it not gone for public spending, how would growth have been impacted?

Sharma: Such models end badly. Japan pumped the economy when it came out of the ’80s crisis. They built bridges to nowhere. We know how public debt ballooned to 250–300%. China started doing that from the 2008 crisis. Once the government gets back to 3-3.5%, you will see a growth slowdown. That option has diminishing and negative returns from here on.

The profit of NSE 500 companies has risen from ₹4.5 lakh crore in FY20 to ₹11.1 lakh crore in FY24. How much of it is due to reduced corporate taxes? Why is this not translating into more jobs?

Mahajan: There are various reasons for corporate profits, one of which is rising demand. The pent-up demand after Covid led to increased demand. The reduction in corporate tax is an illusion. Swadeshi Jagran Manch had been asking the government, why corporates are being offered so many rebates. Fed up with our opposition, the government stopped mentioning it explicitly in the Budget. Then Arun Jaitley came up with the idea that all concessions given to corporates should be done away with. But that could not be done overnight. So, he suggested that those not taking concessions can choose a lower tax. Then it was 25%. If you happen to see older budgets, the effective tax rate was 22-23%. So, reduction in corporate tax is illusionary.

When this government took over in 2014, the Centre’s debt-to-GDP ratio was 58%. Today it is 57%. Why are we getting 85% in 2023-24? State government debt is 28% of GDP. After the 15th Finance Commission, there was excess spending by states. We see huge numbers — 48.9% in Punjab, 42.3% in Rajasthan, all these add to overall debt. Therefore, the Central Government has not been riding on higher debt to finance capex. During Covid we had to raise our tax, and that led to about 61% of GDP. Post-Covid we have been managing, and it is now 57%.

Sharma: We need to understand that deficit by states also contributes to GDP growth. So, there is Central, state, and CAD. All three combined are 85-90, depending on which estimate you take. If you look at data from 2006-07, capex-to-GDP ratio has been between 3.5-4.3%. Currently, we are at 3.8%, lower than 2018 and 2019. The public sector’s share in capex has reduced, and that has been taken into the Central budget. It hovered between 3.8-4.1% for the last 15 years. It was higher in 2007 and 2009-12, in the region of 5-5.3%. In percentage terms, this capex-led growth is lower than that in pre-Covid years.

Garg: The distinguishing feature of the last 10 years has been dominant management of the economy and policy decisions by PM Modi. Modi 1.0 and Modi 2.0 were different and that reflected in economic performance. The first government delivered GDP growth of 7.6%, the highest since 1991. In Modi 2.0, the last three years, it is over 7.5%. If you factor 3% in 2019-20, and 5.7% in 2020-21, GDP CAGR in Modi 2.0 is 4.5%, the lowest growth delivered by any government post 1991.

Modi 1.0 started with a fiscal deficit of 4.5%. It announced bringing the deficit to 3% of GDP. Many forget the FRBM Act was amended in 2018 to institutionalise that the government will have a fiscal deficit of not more than 3% of GDP from 2021 onwards. The Central government will not have a debt-to-GDP ratio of 40% after 2024-25 and state governments will have to bring it to 20%. On both fronts, the fiscal deficit in the first term did come down to 3.4% by the time the Modi government ended. There were about 1-1.5% of off-budget borrowings at that time through fully service bonds and the NSSF funding food subsidy. The Modi government ended the first term with a fiscal deficit of 4.5% in 2018-19, close to the UPA government’s last fiscal deficit. In Modi 2.0, the average fiscal deficit in the last five years is 6.2%, the highest ever by any government.

Almost 90-92% of our capex is in railways, roadways, metros and defence expenditure. Railway capex went up to ₹9.5 lakh crore in 2024-25, from ₹3.5 lakh crore before 2018-21. But part of that has come at the cost of diminution in public sector capex, which came down from ₹6 lakh crore in 2018-19 to over ₹3 lakh crore in 2023-24.

While ₹5.5 lakh crore of additional capex was incurred through the Budget, public sector capex got reduced by ₹3 lakh crore. The net increase is not that massive. Household debt has gone into the housing sector where growth has been good in steel and cement. Growth in dwellings and buildings is there on the government account as well as private households. It has been financed by debt. The GDP growth of 2023-24 at 8.2% has a GVA growth of only 7.2%. The 1% difference comes from net taxes. GVA growth in 2023-24 has consistently come down while GDP has gone up every quarter. The first quarter was over 8% and in the last quarter when GDP was 8.2%, GVA was only 6.5%. The 1.7% gap is unprecedented. GDP growth numbers would be revised down because according to the press release by MOSPI, it seems this time they have taken not only indirect taxes, but all taxes into account.

Now, with a coalition government, we will probably see pressure for special packages for Andhra Pradesh and Bihar. A special category status given to a general state is a contentious policy issue. But the government can bring some sort of special package. We don’t know what it will cost. Despite the increase in railway capex, the share of railways in passenger traffic, freight traffic, and contribution in GVA is going down, which makes debt-funded capex unproductive. Road sector capex has been good and has delivered productivity gains because the private sector builds transport services there. Arms and armament capex doesn’t deliver any economic or GDP benefit.

The government should not go for higher capex going forward. It should bring down debt and fiscal deficit. Capex generates a lot of profit assets, which the PM could inaugurate, such as the Vande Bharats and bridges. It does not seem to have delivered political dividends.

Such capex, not delivering dividends, is a political mistake as well. The government should invest more time. FDI has collapsed. In the first nine months of FY24, we received 50% less FDI. That is a very serious development. We also have a meltdown in the start-up space, which was once the engine of growth. FDI is collapsing, start-ups are not receiving funding anymore and the PLI scheme is not delivering except in mobile phones.

The advisability of tariff protection which this government built up is making the economy less competitive globally. Exports have started declining. This year, goods export was lower than last year. Chinese exports to us or our Chinese imports have not declined. They have gone up despite all rhetoric. If you want investment in renewables, batteries, EVs and elsewhere, there is no way you can see a reduction in Chinese imports.

Reddy: Let me shift to an outside perspective of what we are seeing in corporate India. If you look at just the last quarter, there has been growth, maybe not GVA growth, but GDP growth. And what is the impact of this? Clearly, if you see S&P ratings, they have moved India from stable to positive. All of us in corporate India are positive we will be getting investments into India, especially when you look at the China+1 strategy. That has not fully played out, but potential exists and what we would like to see is stability with some reforms. It has started, be it Skilling India, Gatishakti, infrastructure, or capital allocations for Make in India. The PLI scheme has not fully kicked off though. But we have to come from a stage of solutioning. All of us understand the problems. The fiscal deficit target was 5.8%, we came in at 5.6%.

The problem is while GDP is growing, there are only 60 million Indians with a per capita income over $10,000. The rest are at $2,500. Consumption has only grown 2.5-3%, and inequality is a serious problem. So, the government allows industry to perform better because of better logistics, labour laws, and capital allocation for those states that need it.

Some initiatives will result in per capita income growth for the rest of India. But what can we do to make sure that happens? Let’s not lose focus on the three pillars — manufacturing, especially post-China and the China+1 strategy; agriculture because 40% of GDP comes from it, and services and skilling.

Mahajan: Capex was ₹1.09 lakh crore in 2003-04, ₹1.88 lakh crore in 2013-14 and ₹10.01 lakh crore in 2023-24. On PLI not working, we must look at investment announcements, which are 102 times more than the last three years. You can’t say PLI is not working. Services exports are rising, which led to reduction in overall CAD, from nearly 2% of GDP to less than 1%, and about 0.7% in 2024. That happened with three months of surplus in the balance of payments.

These are the private sector, investing in chemicals, APIs or electronics. Atmanirbhar Bharat will work. If you compare GDP figures of Modi 1 and Modi 2, why do we forget Covid, and that the world was facing problems. While they have not come out of problems, we experienced 8.2% growth in the last fiscal. We can’t say Modi 2 was very bad because we have managed Covid much better than anybody else in the world. Even today, the U.S. is struggling with vaccination. Only 30% of the American population has been vaccinated. We vaccinated 100%.

Garg: I need to place the numbers in context. In 2018-19, budgetary capex was ₹3.08 lakh crore. Public capex was ₹6.08 lakh crore, leading to a total capex of ₹9.16 lakh crore. In 2023-24 RE estimates, budget capex is ₹9.50 lakh crore and public sector capex is down to ₹3.26 lakh crore. Total capex is ₹7.6 lakh crore.

Sharma: So as a percentage of GDP, capex is lower than pre-Covid years.

Mahajan: We should take it as a percentage of the government budget. In 2023-24, the size of the Budget was about ₹47 lakh crore, and capex was ₹10.01 lakh crore. When did we have this share of capex in previous budgets?

Garg: There is no doubt that government capex has increased. The ₹3 lakh crore is substituting public sector capex.

Sharma: Every year the same data pattern is seen. The public sector has been replaced by the Central government. So total capex has increased, but at a far slower pace.

While central capex is rising, why is the private sector shying away?

Sharma: Corporate profit in India is about 3-4% of GDP — 3% is $120 billion. The services sector alone is 70-75% and it doesn’t do capex. The capex part of corporate India’s profit is only about $20-30 billion.

No company can spend two times their profit as capex. The stock market will kill them for high debt levels. So they asked the government to run with the main balance sheet of the country, the Consolidated Fund of India. The government can run with high debt and free cash flow deficits, not corporates as it will reflect on their quarterly numbers.

Bhanumurthy: We forget fiscal policy is counter cyclical. When the economy is going down, you have to pamper the economy. Compare the 2008 global crisis and Covid-19 and how governments responded. During the global financial crisis, India never had a major crisis as exposure to the global economy was limited. But we went for a huge fiscal stimulus and we have seen how we ended up. We had slightly better growth for a couple of years. But the lingering impact of the fiscal stimulus impacted inflation which went to double digits for a long time. Besides, we had a CAD of 6.6%. In 2013, we ended up becoming a very fragile economy for one simple statement by the U.S. Federal Reserve. We have seen how the exchange rate collapsed, and how CAD went up. In Covid, damage to the economy was much larger. But we are seeing growth post-Covid. We are talking about even 4.4% as high inflation, compared with 13-14%.

One should not forget how the RBI struggled to bring down inflation with baby steps of increasing interest rate 13 times. Now we are talking about when the RBI will reduce interest rate. Other countries are struggling even now. We are in a much better position in GDP growth and inflation balance. We need to look at how fiscal policy responded to these incidents. The fiscal monetary coordination is a classic example of how we should manage it.

In the 2018 Finance Bill, we brought in an amendment to remove revenue deficit as a target. The original FRBM Act says fiscal deficit should be 3%, revenue deficit 0% and debt-to-GDP ratio 40%. But the finance ministry removed the revenue deficit target. If you really want to strengthen your growth prospects, you should come back to the FRBM Act.

I have done the FRBM roadmap for the last three Finance Commissions — 13th, 14th and 15th. All numbers are consistent with each other — fiscal deficit, revenue deficit and public debt-to-GDP ratio. If you go back to the original FRBM Act, you will bring down public debt-to-GDP ratio with higher GDP growth. In my report to the 14th Finance Commission, I argued that public debt should be the main anchor, not fiscal deficit.

In the last couple of years, we have improved fiscal transparency, and markets have responded positively. None of us predicted the revenue buoyancy that we have seen in the last two years. I hope that would be one important number to see whether GDP growth is increasing above 8.2%. If it is less than 8.2%, the revenue buoyancy will be more than 2.

Mahajan: The one point missed here is inflation numbers. During the 10 years of the UPA coalition, it was 8.6%. It went down to 5.6% during NDA. Inflation affects the rate of interest and other things. Coalition will always lead to more fiscal deficit, more inflation.

Garg: It is not Covid which damaged the economy, but the lockdown. It was a very unfortunate decision taken in the first wave. In the second wave, which was much worse, since there was no lockdown, the economy did not suffer.

The RBI delivered 100% normal profit to the government as dividend to keep it happy. Whereas it also had to generate enormous amounts of profit by selling securities, booking valuation gains to provide for large reserves requirements, as the Bimal Jalan committee mentioned. There are pressures which are being managed into that coordination.

Bhanumurthy: You also made a statement on capex generating three times multiples, because that number is mine. I had to defend the number which was 2.45. I estimated it in 2012, and was very happy that it became handy when the Covid budget was presented. But actually, it is for the normal period. When you have a business cycle kind of behaviour, the multiple is much more than 2.4. In fact, I have estimated in 2021, it goes to 3.6%.

Many states are talking about reverting to the old pension scheme. Do you foresee a challenge?

Garg: Reverting to the old pension scheme is one of the worst fiscal ideas. It is a great disservice to the nation. We must not go that path at all. The Union government did right by not going on that path and state governments which have done so must revert. You can’t pander to the whims and fancies of the bargaining power of government servants.