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raghuram rajan: Budget 2021: Prioritise, boost infrastructure & sell PSUs promptly, says Raghuram Rajan

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raghuram rajan: Budget 2021: Prioritise, boost infrastructure & sell PSUs promptly, says Raghuram Rajan 2

The government has to prioritise spending which means focus on what is essential. I would start with relief to poorer households and ensure there is adequate relief to small and medium enterprises, says renowned economist Raghuram Rajan talking to Mythili Bhisnurmath of ETNOW.

The Budget for 2020-21 has obviously gone for a toss. How should the government approach Budget 2021-22? Does the choice really boil down to healthcare versus roads, defence expenditure? How does the government go about its Budget?
The word prioritisation is very important. The government has to prioritise spending which means focus on what is essential and I would start with relief to the poorer households and ensure that there is adequate relief to small and medium enterprises. But then move on how to get the economy back on track. One of the best ways the government has of getting the economy back on track is doing these spending on infrastructure. Much of it is done by state governments rather than central governments and so getting the money out to the states is quite important. This is the wrong time to stop the states.



But making that kind of push, ensuring that the government has paid all its bills, so that the liquidity goes back to companies which can use that for investment are all aspects of what the government needs to do. So where does it cut? Well it has to find places to cut. Typically it starts with okay we are not going to use as much paper in the printers — those are low ticket items.

You have to find out bigger places you can cut but my greater source of reducing the deficit may be in selling assets and one of the things the government promises every time and defaults on is selling government companies. They call it privatisation. Nothing really has been privatised. Where are the share sales even? You should be selling shares from every rooftop if you are in a tight constraint. Why are we not doing that? What is holding them back? My guess is we have made some progress but I would want to take advantage of the high prices to have these on tap to sell.

So more infrastructure financed by share sales and so on and getting the infrastructure spending out through the states may be easier than getting it all done by the centre. Those are things to consider as we go forward.

Clearly reforms are important, but we have to do them in a way that does not prompt a reaction which means much more thought going into them, much more consultation and much less of a my way or the highway.

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