T.C.A. Anant, Chief Statistician of India, on Tuesday said the Union Government’s flagship direct cash transfer scheme is unlikely to create inflationary pressure and will be “a step in the right direction” to reduce leakages in the subsidy system.
He pointed out that whether the scheme would spur inflation or not would eventually depend on the Government’s overall “budgetary position”. According to him, it would also depend on how the Government finances it.
“By itself, transfers are not inflationary. It is the overall Government budgetary position which determines whether the thing is inflationary or not. In fact, in a good tax system you will have direct transfer and taxes,” Anant told reporters on the sidelines of a workshop organised by the Indian Statistical Institute (ISI) here.
“Indirect transfers are more prone to leakages than direct cash transfers. So, that is why the Government is saying that they are planning to put in place a mechanism of direct cash transfer,” he said.
Anant added that the importance of the scheme needs to be evaluated. “So, in that sense from the economic perspective, it is a step in the right direction. How well it will work has to be seen,” he said.
If the cash transfer is financed by additional market borrowing by the Government, the chances will be higher for inflationary pressure.
Meanwhile, Anant said the current capital inflow into the country would remain stable as the overall economy is expected to remain “robust”.
“Capital flows are influenced by a lot of factors. Overall expectations of the Indian economy still are robust. I would expect capital flow to stay okay,” he said.