As a most unusual year comes to an end, finance minister Nirmala Sitharaman is confident that the government’s interventions to revive the economy are working and says reforms will continue with a strong focus on infrastructure. Excerpts from a conversation with Sidhartha, Surojit Gupta and Rajeev Deshpande
There have been some positive numbers over the last two days, and last week you spoke of near-zero growth this year. Do you expect a strong bounce-back in the second half and what are the reasons?
A steadily positive message is coming, whether it’s increased GST collections, car and two-wheeler figures, exports, FDI inflows, forex reserves, today’s PMI numbers, or the rural economy sustaining its positive growth. All this gives the hope it is sustaining, but on a note of caution, I will still say I am waiting to get on firmer ground and talk with a lot more certainty.
What would looking for a firmer footing mean?
Continuation of the figures next month as well. Last month, the argument was of pent up demand. October did not have pent up demand and there was adhikmaas (seen to be inauspicious for purchases). Since Diwali is in November, people may say it was due to the festival. I want to see steady growth even with these socalled exceptions getting rationalised.
Are you looking more at domestic demand to sustain growth?
Rise in exports is steady. When I speak to industry, they clearly say there is a lot of reset in industry from the point of view of running businesses with less than more — less of capital, manpower, effort and certain inputs. Industry is realising competitiveness is a strong message. With that, they can reach newer markets, which probably have space that has been vacated.
Does this manpower-driven efficiency increase the challenge for the Centre as far as jobs are concerned?
Various factors are affecting that. Skilled manpower is using the change to find newer and better paying options. Partly-skilled people are probably getting better paid jobs elsewhere. Unskilled people have enough jobs being made available in their respective areas. So, there is a shift happening.
Are there plans to work on an MGNREGA-type scheme in urban areas?
Suggestions have come but the government has to be working on how to and through which instrumentality you’re going to execute that. It requires an understanding of how we can implement it and whether urban and rural are such a distinct lot.
Is there a plan to expand the free foodgrain scheme beyond November?
At the moment, there isn’t any.
You have announced labour and agriculture reforms and the PM is meeting global investors on Thursday. What is the government’s pitch to investors?
The PM’s roundtable with global investors will be very important. During the two terms, we have gradually opened up the economy for FDI, except very few sectors. We have also extended a lot of tax concessions for sovereign funds. When they come, they come after exhaustive study of what is being provided and then look for long-term sustainable investment opportunities. So, all this is getting linked to the National Investment Pipeline, where 7,000 projects have been identified after rigorous work in 2019. The NIIF has had very good success in pooling investors and matching with investible projects. I expect this to be one of the major catalytic points in bringing investors to build infrastructure. Once money goes into infrastructure, it has a very strong multiplier effect.
We have had continuing border tension for some months now. Does that impact our economic growth and prospects?
The situation in Ladakh is being handled by the MEA and the defence ministry. That may be a concern, particularly for the finance ministry, but we have not allowed it to affect the economy in any way.
How is the progress on getting investors to relocate to India?
The robustness of the PLI scheme has attracted a lot of electronics and mobile phone manufacturers to India. There is similar interest in pharma and medical devices.
A major concern is on vaccines — how soon we get it, the funding, and will certain segments be asked to pay for it?
The logistics required to take vaccines to every tehsil are all worked out and laid down. The ICMR has told us that at least three-four developers have come to third-stage testing. The progress on an India-developed vaccine is very satisfying.
What is the assessment of distress in the corporate sector and bank balance sheets?
I am monitoring banks. Because we could extend timely working capital, many who could have faced severe stress have just held up. Many have gone back to business and it is reflecting in the GST and PMI numbers. Banks are also open-minded. With liquidity being fairly easily available, stressed companies will survive. The way we have made funds available to NBFCs has helped reach the farthest point of villages. Some not-so-viable firms will fall off but most or many will see good help and assistance from banks and NBFCs.
About your free vaccine announcement for Bihar as part of the BJP manifesto, is there a clash between the national priority plan and the Bihar poll promise?
I don’t think there’ll be conflict between the state and the national plan. A state government is well within its right as to what it wants to do with the vaccine. It can procure it, it can buy it, it can subsidise it, it can obtain some quantity here, some from elsewhere. Why should there be a conflict?
Food inflation has emerged as a cause for concern. Do you think it is a temporary phenomenon?
Inflation will always be a cause for concern. But in India, perishable goods inflation is an issue. For perishable goods, if the smallest disruption happens on the supply side, it immediately jacks up consumer-end prices. If the onion crop, let us say, is affected due to floods, excessive rains… it is bound to have an impact on the market for which the government will have to immediately make arrangements. I understand the food and commerce ministers are coordinating efforts. Similar is the case of potato shortage. Tomato, Onion, Potato — the TOP is something on which some money was granted through food processing a year ago, even during the Atmanirbhar package.
Is there any fresh progress on GST compensation with states? Do you see the clash between opposition-ruled states and others impacting the overall culture in the GST Council? Will it leave scars on federalism?
I don’t see it is (as) what I desire. I want to say I don’t see it. I desire to say that and I make efforts to make sure that it’s not a challenge to federalism. There can always be discussions and one very robust and active forum is the GST Council. But discussions cannot be treated as injury to federalism. If we think every time we don’t arrive at a consensus-driven decision, there should not be a decision at all, and suspense should be the decision, that’s unacceptable. I must say GST Council has conducted itself with great statesmanship.
What is the fresh development on the compensation cess issue?
You are aware before Vijayadashami, we released one tranche of Rs 6,000 crore for states that had opted for Option 1 and that was at 5.42% interest. It was released on a Saturday because Monday was Vijayadashami and I had very clearly said the first tranche would be released before that. Today, Monday, the second tranche of Rs 6,000 crore is getting released. This is borrowed at 4.42% interest rate. So, the amount will be released for all those states and Union territories that have opted for Option 1. From now, every Monday, we will be borrowing at whatever rate.
Do you think the disinvestment programme has been a little slower than what you may have anticipated? Are you looking at any mechanism to make it more efficient?
Disinvestment is not all that straightforward as you say. It’s not an issue where irrespective of any other factor, I will still sell it. That cannot be the way it happens. We are we forgetting that Covid affected everything.
Do you think bureaucrats are still scared to take decisions given the recent case linked to the reopening of the Lakshmi Vilas Palace hotel sale issue?
I wouldn’t say they are not coming forward to take decisions but they are cautious. We have allowed bureaucrats to work together with us and we have formed groups of ministers, groups of secretaries, groups of secretaries at the cabinet secretary level… these act as filters. Therefore, the kind of question: ‘Am I going to be caught alone for signing this file’ is not there. Everybody is working together as a team.
You going to begin work on your next budget. What would be the priority areas this time?
Too early for that because the department-wise preparatory work is going on. Then we will have to sit as a ministry to see where everything is leading us. Post that is when we have to sit and see which are the priority areas. Infrastructure is one area which will have focus.
Do the reforms which the government has brought about provide the framework for moving forward?
No doubt, reforms will be the plank and even industry has realised that they have to look at themselves as to how they are going to live in the post-Covid era. There is a lot of reset happening. So government will also have to see how the economy, given the reset, is doing and therefore the government resets that we have to undertake.