Finance Secretary TV Somanathan – the top bureaucrat in the Union finance ministry – who also holds the portfolio of expenditure is sure about India’s fiscal health getting stronger with the robustness of its economic growth. Better fiscal performance is the outcome of systemic reforms and hard work undertaken by various arms of the government, he says in a conversation with Hindustan Times. Edited excerpts:

It appeared incredible when the finance minister on February 1, 2021 envisaged a glide path to bring down the fiscal deficit from 9.5% of GDP in RE 2020-21 to below 4.5% by FY26 with a fairly steady decline over the period. But the government has overachieved compared to the 5.9% milestone in FY24. What is the magic?

It has been a steady annual process. I wouldn’t say it is magic, it is more hard work. I would say in the sense that both the revenue side and the expenditure side have been managed with care. On the revenue side, various measures, which were taken to improve tax revenue, are bearing fruit. And some of these are the fruits of long-term changes started even before 2019.

Read here: What does the interim budget do for elections?

Like, the change in the various information systems of the tax department. The fact that we are disclosing… whatever information is known about the taxpayer is disclosed to the taxpayer himself to say that we know this about you, now you please file your return. So, instead of first him filing a wrong return and then we going after the person, the person is told this is the information we have.

On the expenditure side we have moved to “just in time” management of funds.

Earlier, often funds were released to some agencies for executing a government scheme. They were not yet ready to utilise the money, but we would release it in instalments. So, a lot of money used to sit with these agencies. They would get small interest from a fixed deposit, but we would be paying a higher rate of interest on our borrowings. Now we have a system. We don’t release money to them until they have exhausted the previous instalment and we have visibility whether they have exhausted it or not. Until the previous instalment gets fully spent on the intended purpose we don’t release the next. This has made our requirement of borrowing slightly less. It has meant that our interest burden has gone down. It’s a steady three-year effort. And we have also been able to contain some of the subsidies through better management. The FM referred to DBT [direct benefit transfer] and so many other expenditure management practices. So, all of this together has led to this result.

If everything was planned then why is the expenditure on many heads relatively low?

In certain cases, the expenditure is less than the budgeted [amount] due to the departments’ requirements having gone down. They say they are not able to [meet] the [required] pace of execution of works, etc… So that is between the revised estimate and the current year ‘s budget estimate. We have not consciously cut any scheme expenditure. On non-scheme expenditure, we are always very tight, but scheme expenditure we give whatever the department requires within the budget. So wherever there is a reduction, it is because the department has not been able to fully utilise the availability. They may have their own constraints, but there is no conscious cut there.

What will be your next move so that all departments should give a realistic budget and execute projects as planned?

We can say that but you know, India is a vast country. Unexpected events can happen. In some states land acquisition may not happen as planned. We can further improve, I’m not saying we cannot. We must, but perfection cannot be expected. That is why what we try to see is the aggregate. In aggregate, we are close to the estimate. Department to department there may be variations. Total revenue expenditure is very close to the budget estimates, not very different.

The government’s borrowings rose during the Covid period with huge interest outgo. Are you concerned?

It is definitely a concern, but it is the result of inevitable higher borrowing which happened during Covid. So, there were two or three years in which we had very high deficits. 9% fiscal deficit means that much of borrowing has been done. The interest on that borrowing will come now. It will keep coming until it is repaid. Similarly, next year it was 6.9% almost 7% deficit. So those deficits were necessary at that time to tackle the crisis. But the interest on those deficits we are paying now, so interest is a concern and that is why it is important to have this fiscal consolidation to reduce future borrowing.

Is there any scope to reduce the interest burden on those borrowings by restructuring?

No, there is not much scope to do that. We do not have any scope for restructuring. We will have to pay off. There are two ways: One if the economy grows fast, the burden will automatically become bearable. Quick GDP growth is the best solution for our debt position. The second is optimising our cash management, minimising unnecessary borrowing, which is what we are doing with the “just in time” system.