In a tongue-in-cheek comment, former Reserve Bank of India (RBI) governor Raghuram Rajan said we have always had ‘fudgets’, when asked if he believed in the government’s assertion that it has been able to cap the fiscal deficit at 3.5 percent.
Speaking to BloombergQuint on the sidelines of the World Economic Forum (WEF) in Davos, Rajan said that he picked up the term ‘fudget’ recently from an expert.
The term refers to a ‘faux budget’ that uses imaginary figures and projections with little or no basis in reality.
Speaking further on the fiscal deficit numbers, Rajan said, “Numbers are not as important as the quality behind it. Numbers can be achieved by putting off a lot of things from the balance sheet. This is something that the CAG has pointed out”.
Earlier this month, Mint had reported on CAG, the national auditor, criticising the Modi government for borrowing through off-budget channels to finance capital and revenue spending in 2016-17. This, the report said, masked the true extent of fiscal and revenue deficits.
Speaking on the upcoming interim budget, Rajan said the government should place a “responsible budget”, so that the next government which comes to power, is not saddled with legacy spending.
He also said that the government that comes to power after the general elections should focus on creating more jobs.
“In terms of agenda for next government should focus on how do we create jobs and how do we improve quality of livelihoods in agriculture and rural areas,” he said adding that infrastructure need to be build to create semi-skilled and unskilled jobs.
Rajan also made a case for protecting the RBI’s independence by a law. “Going forward we need to see if we can enshrine the independence in statute...the country needs that,” he said adding that independent institutions are created so that they can say a ‘no’ to governments at times.
Reflecting on the Modi government’s tenure, he said that reforms like the IBC and GST were good, however, maintaining that demonetisation set the country back. He also said that he is uncertain about the inflation numbers and that concern remains on that front.
On the issue of agrarian distress, the former RBI governor said that the possibility of making agriculture a success story has not been explored and government intervention in agriculture has been sporadic. When asked if measures like the direct benefit transfer should be introduced for farmers, he said that they should not be implemented on top of the existing programmes, but as a replacement.
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