At the CNBC-TV18 India Business Leader Awards (IBLA), the union finance minister Arun Jaitley almost launched a budget curtain raiser by hinting that a relief package for farm sector is merited.

Share Market Live

NSE

CNBC-TV18 caught up with Ananth Narayan, professor at SPJIMR; Abhishek Upadhyay, senior economist at ICICI Securities PD; Suyash Choudhary, head - fixed income at IDFC MF and Pronab Sen, former Principal Economic Advisor to the erstwhile Planning Commission, to discuss how such a relief package may be provided in a vote on account and what impact that may have on the economy and more importantly on the cost of capital.

Narayan said, "There is a clear intent from the finance ministry of treating the current situation as exceptional and therefor launching something by way of a scheme to address the rural distress. I think it has implications for the fact that we already have a fiscal deficit situation, which is not looking good. And we are going to mask it by using a whole means of cute accounting standards. On top of that, if you add another fiscal slippage, it is going to put pressure on the macros.

Upadhyay said, "For FY19, we are expecting government to print a deficit of 3.5 percent. Even this is optimistic and would be achieved only by creative accounting and slightly by shifting some expenditures off balance sheet by the government. For next year, it's an interim budget and our sense is that nothing stops the finance minister from announcing a big new scheme. Similarly, announcements would be made in the interim budget, but sufficient provisions would not be there."

Choudhary said, "Whatever the package government announces in the budget, it has two implications. One to the fiscal deficit target and two, how does it change RBI's response function if at all. I read somewhere that NITI Aayog's point of view is that a lot of the existing subsidies including fertilisers, power and some other input costs should be subsumed into a basic transfer scheme.

Sen said, "I don't think waiver is a way out. The opposition has already taken that hunter. So, I do not think that is going to happen. The most practical thing they could do without any budgetary implications at the moment is to simply tell the banks that we are invoking force majeure, so please rollover the agricultural debt over the next two years. That is easy to do, but it requires is an acceptance that the current state of being is the result of demonetisation."