INTERVIEW WITH FINANCE MINISTER NIRMALA SITHARAMAN | 'IN MODI 3.0, TECH-DRIVEN CHANGES WILL BE OUR TOP PRIORITY'

Q. It has been 10 years of Modinomics. What would you say have been the four main pillars of the Modi government's policies that have seen the economy not just recover after the pandemic but do so with a robust growth of 7.6 per cent?

The four things that readily come to my mind are: the effort taken to remove that wrong perception about India that you're capable of nothing, that you can't really come up, that you're corrupt, that your red-tapism will be permanent... Second, ensuring that policies were in tandem with people and their requirements—not so radical that they get rejected, but taking India up the ladder, stable policies that would attract people towards our country, give our own citizens that confidence that governments can deliver and deliver not just for the poor and the needy but also for systems to be improved. Third, making sure you identify areas in which India's policies are tailored to meet the demands of the 21st century, including sustainable growth. And fourth, identify areas in which India can lead globally, invest in them and support people to go into them and give India the advantage.

Q. You talked about keeping balance in the reforms that were taken up. Yet, in 2016, we saw demonetisation shake up the economy. What are the lessons from its implementation?

The fact remained that for a major step on that scale for removing black money because of high denomination notes, people accepted it. They said Prime Minister Modi's intentions are very clear; yes, there are difficulties, we'll face them. A corollary to it is the way people went into digital mode of payment post that, even more because of Covid. And you're saying that India has set a leadership role for itself, not just the leaders, (but also) common people, the way in which they've adapted to it. Some of the leaders who come from abroad are fascinated by the way the nariyalpaniwala uses it, the thelawala uses it, even in the remotest villages.

Q. And yet some people say cash is back in full amount and, therefore, the whole purpose of demonetisation stands defeated, it is a failure.

What did they expect? Did they have a blueprint of what demonetisation was before the prime minister brought it in? Can the PM, particularly when you're bringing in demonetisation of all high-value currency, sit with all parties and say, "Look, you tell me the muhurat, I'll introduce it and then we'll do it?" What was their argument at that time? You're attacking the stock of black money, you're not talking about its flow. Here is a prime minister who comes in in 2014 and the first file he signs is to set up a special investigation team to look into matters of black money. Post that, one after the other, legislative measures are taken to make sure action is taken against people who are stacking money abroad. Post that, you bring in certain KYC (Know Your Customer) practices into banks, run banks professionally, see where the money is going, whose money is coming. Politically sensitive individuals, or (those who fall afoul of) the FATF (Financial Action Task Force) Act, are expected to be red-flagged as and when a major quantum of cash is transferred from one account. These are all steps Prime Minister Modi has taken.

Q. And has the quantum of black money reduced?

At least you are able to track it all down and take action. And look at the way the Enforcement Directorate or the Central Bureau of Investigation is going after stacks and stacks of money kept in homes or in toilets or in farmhouses. Are these not efforts towards eliminating black money? When we do it, they say, "Oh my God, you unleash these agencies." And when we don't, they ask, "What have you done about it?"

Q. A major issue that has come up this election is the lack of jobs. Opinion polls, including those by India Today, are showing that unemployment is the No. 1 issue in the country today. What do you have to say?

There's no denying the fact that you need more data to talk meaningfully about jobs. India doesn't have it, and I'm not saying that with a sense of complacency. I fully recognise that there is a need for good, reliable data, both for jobs in the formal sector and, equally or more importantly, about informal sector jobs. Once we get some data for the formal sector, we seem to reach a conclusion for the entire economy, which is not right. The informal sector today has shown much buoyancy. Let's answer these questions. Do startups function in isolation? The last figure, I think, was 97,000 start-ups, which got registered in the Department for Promotion of Industry and Internal Trade (DPIIT). That is, after 2016, when (the Start-up India scheme) was launched. You think they don't create jobs? Are they one single person running a company? Second, the new sectors coming up—renewable energy, green ammonia, solar particularly—how many are we seeing in terms of large solar firms? Do you think they run with one individual? Then, through the PM SVANidhi, and the PM Mudra, the number of people who have taken loans which are collateral-free. I want to ask the Congress which talks of Nyay, when loans are going to small people, you ignore them completely and instead condemn them saying Modi is giving loans only to his friends. So, are these Ambanis and Adanis? Also, under the government Rozgar Mela, in the past 12 months, commencing November 2022 to October 2023, 10 lakh jobs that were vacant have been filled.

Q. The criticism is regarding self-employment, which is largely disguised employment or underemployment, in comparison to formal jobs.

This underemployment logic cannot work when people are taking money from the bank and doing their own business. Underemployment was significant as a factor in economics when you were talking about an excess number of people dependent on agriculture. In the past decade, there is a clear move out of agriculture into other skills. That is why, when the e-Shram portal was launched, much to the surprise of the ministry itself, there were more than 200 trades that were registered in which people were engaged, and which the National Skill Development Council is working on now. So, underemployment is never the issue when self-employment comes in. Today's economy is moving towards people doing their own work, it's all about being entrepreneurial.

Q. Another big election issue is high prices. Government figures show that inflation is under control, but when the common man goes out to buy a basket of goods, they find the prices high. Is there more that could be done to rein in inflation?

On inflation, my answer is that any amount of effort, because of the nature of goods that come into the market and that make it to the poor man's thali, will always be inadequate. And that's not to say I wash my hands of (the problem) there. Not at all. Whether it's onions or potatoes or edible oil, whether it's making sure that vegetables reach in time, whether it is pulses that we don't produce adequately, importing them in time and in bulk. At least, 5-6 years ago, because of the incentives given, many of the farmers moved to producing pulses. But after that, there was a disinterest because of procurement- or price-related issues. In this, state governments also play a role. Now, after a point, the imported inflation also adds to your burden. Edible oil prices are fluctuating. Crude, of course. Post-Covid, urea prices reached Rs 3,000 a bag. A bag that a farmer buys at Rs 298 is completely imported. I had to highlight this to the PM and he was very clear. He said you will import. There shall not be a shortage, despite the price you will import and the burden will be on our government. It was a clear instruction. So, we are managing that input cost and making sure the fuel, which is a big component, is also maintained. Because of the leadership of Prime Minister Modi, we didn't fear sanctions and could still get imported crude from Russia, after the Ukraine war, at a discount. We kept national interests in mind and didn't hold back.

Q. The advantages of Russian oil are now waning in some sense, and fresh disruptions are happening in West Asia. What will be their impact?

I think it's three wars as well as the major disruption in the Red Sea. There is going to be great volatility, including in the movement of freight on the high seas. All countries, including India, will have to brace for these uncertainties. Crude prices have breached 90 dollars a barrel (on April 18 and 19). In spite of Covid, in spite of so many wars, in spite of disruption in the high seas, in spite of the China-US problem, we are still managing inflation and keeping it well within the limit.

Q. Experts are pointing to a K-shaped growth in the economy where the rich are getting richer, and the poor, poorer. Shouldn't it be a matter of concern?

Just look at the way your GST collection is going. GST is not in its favourable grade structure yet. We will have to do some work on rate rationalisation. We will also have to look at the direct tax collection. There was a time when people said GST is earning more than direct taxation. That's not true. Direct taxation is contributing much, much more now and that's how it should be. What Prime Minister Modi's economic vision is is to make everyone create wealth for themselves. Like there's a proverb in Tamil—viralukketha veekkam—the size of the finger will determine the quantum of swelling it will have. Like that, each according to their size. If people are able to earn on their own, save on their own, have some property of their own, that itself lifts them from where they are to the next level. It is that kind of targeted approach which can help remove inequality and which is also recognised by people who have looked at multidimensional poverty. Around 25 crore people have been pulled up from extreme poverty. Garibi Hatao didn't do that in 50 years.

Q. The Congress disagrees.

Inequality is the kind of debate Congress loves to have because they are anti-wealth creation. Do you think throwing that one lakh rupees, as the Congress promises, will meet a person's medical requirements, of education, of having a house or of getting drinking water in the house, or of getting cooking gas. It clearly shows the mentality of the Congress. Throw money at poverty and poverty will go away. That's why they also use this expression, "I have a magic wand with which I can remove poverty". You should have told your grandmother, even as a bachcha (child), that this is a magic wand but that you should use it, Indiramma, to remove poverty! These are very irresponsible ways of creating an illusion about how simple the problem is.

Q. Coming to private investment, are you disappointed that despite the government's actions, including reducing corporate tax, it remains sluggish? That corporates have not returned to the economy the profits that they have gained?

About the point whether they have returned to the economy, I think they have done it in the form of giving better dividends to their own shareholders. Most are not individually owned companies. There are small investors who put money in them who are also sitting and waiting for that golden day when they will get that money. So, dividends have gone to private, small investors as well. Second, they have paid tax. They have paid the banks back. So, your banks' health has been restored. It's not as if they have really not done much with it. But equally, I would also want our attention to go towards the investments that are happening in the newer areas, those who are investing in electric vehicles, setting up wind and solar parks. Then, in today's India, whether it's government bonds, or commercial borrowings, people find markets in India with money available for anybody to borrow from. The expression "crowding in" is actually happening now. Private money is coming into the markets. Companies are able to borrow from it. Government borrowing from the market has not put them out.

Q. So are you satisfied with the private investment that is coming in?

I would want it to be even more. There are newer areas. Renewable energy, API, medicines, large generic drug manufacturing are expanding in India. Look at the way API or active pharmaceutical ingredients are coming back into India. India was a leader in API at least 30 years ago. Gradually, we lost to predatory pricing from China. Today, government policy has made it attractive for companies to come back and set up API-producing units. And they are very high investment units, because API production involves a lot of processes that can pollute. To handle that pollution, they have to invest in pollution treatment plants and so on. Government is not setting up API units, the private sector is setting them up.

Q. Although we saw the landmark sale of Air India, a few other disinvestment announcements remain pending. What are the reasons and will they be taken up if your government is re-elected?

The cabinet has already given a list of items where disinvestment was approved. If we have not completed the disinvestment of those for which approval has been obtained from the cabinet, it's not as if we've left them there languishing. The valuation of such public sector companies has increased manifold. In fact, the lowest increase in valuation is 150 per cent. Some have even crossed a 1,000-fold increase in valuation. We are serious about disinvesting them, and will find an opportune time to do so.

Q. Disinvestment is also a political hot potato. Are you concerned about the backlash from trade unions of the companies on the privatisation list?

Constantly putting that argument forward doesn't augur well. In Air India's case, consultations with the trade unions went on till the last minute. Tell me, after giving it over to a private bidder, has anyone been removed from a job? If anything, they have been given increased responsibility. And whoever has wanted to leave has been given a handshake that they couldn't even have imagined. So, when we are disinvesting, we are not unmindful or uncaring about the requirements of the people working there. Trade unions today are very realistic. They know what they are in for. They want the unit to be working, running and making profits. They want those institutions to work. They do not want them closed. So, our disinvestment is not for closing them. They are for selling them out as growing firms and their jobs are going to continue.

Q. What about asset monetisation? There are areas where not much progress seems to have been made.

In real estate, REITs (real estate investment trusts) and InvITs (infrastructure investment trusts) are two new tools of investments that have successfully managed to keep that sector alive. Today, real estate is doing well because there is demand and inventory too is getting cleared. Today, in the real estate sector, we work together with the states, and state governments have also conveniently changed registration stamp duties. Maharashtra, in particular, has done brilliant work, as a result of which all inventory has been cleared.

Q. Will the other areas of asset monetisation be taken up with more gusto?

We have to move on them, there's no doubt. The decision of the cabinet cannot be negotiated or disputed. But when and what is the opportune moment for doing that is the question.

Q. Manufacturing has remained stagnant with a contribution of just around 15 per cent to the economy on an average. Don't we need to kick it up to at least 20 per cent for jobs to grow?

I'm not even fixing a number. Manufacturing will have to grow. What model it has to take is a different story. Some would say "Copy China". Some would say don't do so. India will have to be aatmanirbhar (self-reliant) on many things it consumes, which the country is capable of producing. We need to prioritise things that we are currently importing but, eventually, it shouldn't stop there. It should expand to include other things as well. You need to have some manufacturing base without doubt.

Q. What more can be done for the MSME (micro. small and medium enterprises) sector, which is a major engine of growth?

I don't want to begin by saying we've done a lot. But we have done a lot for MSMEs—changing their definition, giving them loans within 59 minutes on the ticker. They have to just go register and say this is the amount they want, and the approval comes within the 59th minute. Post that, they can always avail of the details. Sidbi (Small Industries Development Bank of India) has been given more and more money to finance MSMEs directly. I've sat with Sidbi to say there are some 300 clusters of MSMEs in this country, you should be present in most of them, physically. We've asked them to open branches in each of these clusters and where they cannot because of distance or something else, they deal with them online. Other than this, the 45-day payment—they said nobody is paying us (our dues) within 45 days. It had been an MSME law since 2008 or 2006. Nobody was obeying it. We made sure that payment is made within 45 days so that their monies were not locked up. For MSMEs, we are constan­tly sitting and listening to them and taking their suggestions forward. We'll continue to do that.

 

Q. Coming to Modi 3.0. What are the things we can look forward to if your party gets a third term?

The emphasis on infrastructure will continue. There will be a lot more access to different regions that even now are far-flung. The digital infrastructure will certainly be ramped up. Education, health will continue to see the concern they have been getting in the past few years. Skilling—we need people to be ready as soon as they finish their university courses to be in a recruitable position. Today, industry grudges the fact that the graduates who come out of colleges take nearly a year on the job to get trained. That is not the investment any industry wants to make. We need our graduates to come out ready for jobs. And many of them who go abroad for jobs should have the necessary skill set along with the language of the country they go to. So we'll be placing a lot of emphasis on that. Also looking at artificial intelligence, getting people to become savvy in using tools that can be derived out of artificial intelligence, sunrise sectors—investments to be coming in for rare earths, utilisation of green ammonia, making sure that India continues to have that lead in the services sector, other than making sure manufacturing happens in India as in the defence sector.

Q. What are the key areas where further reforms or big changes are likely?

Technology-driven changes are going to be top priority. Of course, start-ups in the area of fintech, technology for solutions for rural livelihood, the mission lifestyle for environment. You need equipment, technology that can make our lives simpler and sustainable. We are also looking at India's capabilities in the field of generic drugs. Reforms can no longer be itemised, they have to be continuous and systematic. Systemic reforms, which have been waiting for some time, will have to be undertaken and taken down to the panchayat and local body level. Permission for setting up a unit in a panchayat, for instance. You think the panchayats are doing it simpler? You need to get them to do it a lot more transparently and simply.

Q. Will GST also see some changes, including rationalisation?

It's not an area ignored. There is a group of ministers and their report will have to be taken up to the next level after the post-election meeting by the GST Council.

Q. There are still many rough edges around Centre-State relations on GST and its sharing. How do you propose to address that?

I think this is a completely political game that the Opposition parties are playing. I challenge anyone to tell me if payment has been denied to a state, which is its due. I can, from the ministry of finance, tell you that, if anything, payments as per the recommendation of the Finance Commission have been done in time, sometimes well ahead of time. What I have to pay in January, I paid in December. What I have to pay in December, I have paid in November itself. But if you have a further issue to take up because of your performance or because of your population, or because of efficiencies that you brought in, you must talk to the next Finance Commission. It has already been constituted.

Q. This is what Tamil Nadu chief minister M.K. Stalin has said at election rallies, that of the one rupee his state contributes to the central exchequer, it gets back only 29 paise as its share of taxes.

What kind of an argument is this, sensationalising and creating rift between people? What if within Tamil Nadu, Coimbatore and its neighbourhood, who contribute substantially to the state's revenue, say, "No, give it all back to us." The district from where the chief minister comes—Thanjavur—will not get money. Or Sriperumbudur. Is this how they want the country to be covered? Are ports and international airport terminals not being constructed in Tamil Nadu? Are Vande Bharat trains not going to Tamil Nadu? Who pays for all this? For a product manufactured in Tamil Nadu, the buyers are from all over India. So the money you get as tax is not your own. It's contributed by all countrymen. How convoluted are these arguments?

Q. It's not just Tamil Nadu, all the southern finance ministers have raised this question.

That's why I'm saying it is very political. Karnataka is raising it now because they have made unsustainable promises in the name of freebies and their own deputy chief minister goes about saying "I don't have any more money to give for development. That's it. Sorry, I've given it all for this." And then says, "Modi, you're not giving me money." Tell me which money Modi has not given you? These are completely politically distorted, opportunistic arguments. And if they have a point to make in terms of efficiencies that they have brought in, they should talk to the Finance Commission and not blame the Government of India.

Q. How would you address the delays in the IBC (Insolvency & Bankruptcy Code) process, which is still by far the most adequate mechanism to address insolvency issues?

IBC per se is not to be faulted, I think. It has been amended as per industry requirements so that it is more nimble. It is more ready to keep companies as going concerns rather than liquidating them. But there are certainly problems in filling NCLT (National Company Law Tribunal) and NCLAT (National Company Law Appellate Tribunal) vacancies, getting more true resolution professionals who come with certain skill sets and also have to be trained. Then, there are times when you will see a setback, when people game the system so that the old, discredited promoter himself wants to come in through the back door. We are, therefore, trying to build firewalls so that this doesn't happen. It is teething issues like these that have marred the progress of the IBC, but the IBC itself is not the problem. It's more the system that will have to be spruced up further so that it stands the test of time.

Q. Will Modi 3.0 see more consolidation of PSU banks and licences given to new private banks?

India needs a lot more banks, no doubt. A lot more big banks. At the same time, a lot of small banks as well, you need them on the ground, accessible in local areas. Small financing institutions are doing well and we need more of them as well. So, the banking system sector will have to be a lot more vibrant. We are happy that we have restored Indian banks to good health, but the entire sector requires a lot more vibrancy and we need a lot more banks.

Q. How will the weakening rupee, along with the rising crude prices, impact the economy?

It will be a challenge, no doubt. But the rupee and its fluctuation against the dollar is not the story of the rupee against other currencies. It has been steady against other currencies, the fluctuations have been minimal. If it is fluctuating against the dollar, it's because of the strength of the dollar. And the US economy has given indications that it will become only stronger. So, we will have to see how we can meet that challenge, whether it's crude prices, exchange rate fluctuations, particularly against the dollar. And, on that, the Reserve Bank is also keeping a continuous eye.

Q. In the white paper that you brought out on the UPA's handling of the economy, you had criticised it for allowing the rupee to fall 36 per cent between 2011 and 2013. But the rupee has been falling substantially under the NDA too.

Isn't there a difference between the dollar becoming weak during the fragile five economy and today's economy, which is stronger, faster-growing where your GDP is expanding and you're aiming to become the third-largest in the world?

Q. The Sensex breaching the 75,000 mark. What does that reflect?

A sense of confidence in the Indian economy. Confidence in a stable majority government, with stable policies. Confidence in taxation, which does not keep going up and down. No flip-flops. That's what the stock market is showing.

Q. The prime minister is pitching for India to become a developed economy by 2047. Conservative estimates say you have to grow at close to 12 per cent compound annual growth rate. Do you have a blueprint to ensure that the target is met?

There are several things that I've told you already. We have to be consistent in our policy. We have to be supportive of every section of society. We need to root out corruption, otherwise people will be pilfering others' wealth and not really allowing the economy to grow. Every section of India has potential for export. Agriculture has big potential for export. Manufacturing has to come back to its good, glorious days. Similarly, the support being given to the services sector will have to be widened. Our defence exports have shown that if our policy mix is correct, they can perform. We need to do all this and continue doing it. But on a lighter note, we need people, at least in the Opposition parties, who believe in India. They don't have to tout the idea of India if they don't believe in our own people. Please don't undermine India's own people's credible achievements.

2024-04-27T02:18:52Z dg43tfdfdgfd