THE MACRO PICTURE

CEOs of businesses entrenched in rural India say it’s holding up the economy due to the stimulus. In the first quarter, GDP grew 20%, albeit on a low base. What progress do you expect on economic growth in this year and the next?

On never losing the opportunity—whenever it arises—of expanding the domain of people who are benefitted by steps that you take, I certainly would think the exemplar before me is Prime Minister Narendra Modi. He has attempted at every moment to ensure that the steps he takes, the policy changes he brings in, his intervention into the economy and the relief that he provides to the masses are aimed at the bottom-most level, which is the most remote from decision-making centres—the common man and small businesses.

Using technology, PM Modi tries to reach out to all sections of people. So, on that score, my exemplar obviously is before me. The person who guides everything that we do in this ministry is the prime minister. Similarly, being given that opportunity, I have kept that (idea) before me, because I also come from a middleclass background and understand the struggle that people face, especially in this kind of a situation.

There are clear-cut indications of confidence in the Indian economy, and with vaccination, there is trust that we can overcome this problem. Therefore, the indicators that you see—be it electricity consumption, growth of core industries, demand for raw materials—all indicate that the economy is on the recovery path. The Reserve Bank of India (RBI), which is constantly monitoring the situation, has highlighted some inflation concerns. Even on that front, customs duties on certain essential goods have been reduced, making sure that prices are maintained well below the mark beyond which it hurts the economy’s psychology.

These efforts tell me the economy is on the recovery path. We have also had a credit rating agency indicating that India’s position is now assessed as stable, and the economy reviving. This year, the growth is on a low base, as you mentioned. We will have a good number next year because we’re building up on it. India will also be one of the fastest growing economies and I am confident that India, Indian entrepreneurs and Indian people will all hold together, and as we say nowadays, sabka saath, sabka vikas, sabka vishwas and sabka prayas will help India move on that trajectory.

Do you think the RBI’s growth projection of 9.5%, or the Economic Survey’s projection of 11% economic growth, are achievable?

I am not going to engage in speculation of numbers. My business is to make sure that all kinds of facilitation is extended to every aspect of the economy and difficulties removed. Especially difficulties that can be speedily removed so that the recovery happens the way we wish it to hap- pen. Therefore, I look at facilitating as much as asked for.

The budget-making exercise will kick off soon. What will be the broad themes the government will pursue?

It is a bit early for me to say that. The exercise on deciding or consulting on the budget has not begun yet. What has begun is the exercise on arriving at revised estimates, engaging with different departments. On priorities, one thing I can definitely say is that we want to ensure continuation of capital expenditure emphasis given last year. Sustained building of health-related infrastructure will continue. Other things, I will have to see as it goes.

The thrust on capital expenditure in Budget 2020 gave the economy heels to dig in when other parts were not working. Now, exports have started to show some traction. When do you think the private sector will have the courage and confidence to start investing?

Private investments, I think, are coming. Last year, or the year before that, I would have said that private investments are not happening. In October 2019, after reducing the corporate income tax rate, it was reasonable to think that private investments will improve. In 2020, post coronavirus, one had to wait and watch.

Meanwhile, to be fair to the corporate sector, many cleared their debts and paid back banks as they saved tax. With the burden lightened, this year, we are seeing some of them expand capacities. I heard the core sector people in various reviews that we held across India. Steel and cement makers are looking at capacity expansion. Real estate has witnessed reduced inventories even in Mumbai, thanks to various factors, including reduction in stamp duty. When I was in Mumbai some days ago, real estate industry representatives told me that in one of the complexes, 300 flats were up for sale and within two days, 260 got booked. When real estate moves at this pace, its impact will also be felt on steel, cement and other things

The reason to expand is not just corporate tax reduction but also demand. As a result, industry is saying they are expanding capacity. Private investment is happening. New-age industries, start-ups, gig operators, tourism industry operators, home stays are also expanding.

They may not be doing it in terms of plant and machinery but this increase in capacity has an immediate impact as it creates jobs and adds value to assets being used for serving those sectors. Whether they are restaurants, home stays or small hotel properties, all of them are going to have an increase in valuation as businesses are putting money in these areas.

So, private investment is raising a lot of capital. I am happy to say that they are raising capital even within India. Earlier, the feeling was that it was easy to raise money outside. It is a big sign of the confidence in the Indian economy. The capital available in the Indian economy itself tells a story of economic recovery.

You talked about psychological barriers and efforts taken by the government to see that prices do not breach a psychological level. In case of rising fuel prices, where does the government stand?

Yes, it is a major concern. We are looking at ways we can assess what is going to happen. Current trends indicate that globally there may not be a supply constraint. There is a little bit of increase in supply. But there are indications that prices may go up further. The extent of the price rise is some- thing we have to see as it happens. We are keeping a watch on the global fuel situation, particularly the Indian basket. Fuel prices are something on which all of us are equally concerned.

Is there a cut-off for oil prices after which you think prices should be brought down?

I will not be able to say anything on the cut-off. A few years ago, petrol price at ₹50 a litre, or ₹60, or ₹70 would have been cause for worry. It is matter of its relative position in the economy and also inflation.

Also, India does not have substantial oil wells or gas that can be explored. There could be potential and the government is investing in realising that potential. As an imported product, with a certain level of refining expenditure over that, there are limitations in thinking what you can do about it.

As the economy picks up and tax buoyancy comes in, can there be rationalisation of tax on fuel products? Can there be a relook?

There can be a re-look even without the economy picking up. If it picks up, all the better. But what will be the outcome of the relook, we will have to wait and see.

THE LIQUIDITY POSITION

What is your view on liquidity now? The banking system is flush with funds, the unused liquidity in the banking system is very significant. Do you think there is need for a course correction?

First, banks have the liquidity for developing businesses. In order that we cover every little pocket and section which may want credit, we came up with a scheme after the second wave (of coronavirus) to ensure that through microfinance institutions, NBFCs would also forward liquidity to help businesses with unsecured loans up to ₹1.5 lakh. I am glad to see that the entire amount has already been exhausted, which means it has reached the end credit demanding business or individual.

From October 15, I did ask banks to begin a credit outreach programme so that credit is available to whoever demands it. So that liquidity, which is available for development of businesses, reaches NBFCs and MFIs and no part of this country feels that credit is not available from our end.

About excess liquidity, I am sure RBI has also taken a call. It was mentioned once earlier by the governor that a hurried withdrawal will hurt the economy. Therefore, both government and RBI will not do a hurried withdrawal. We will have to do it steadily and be sure that growth is not affected. Caution is the word.

How do you see the recent decision of the Monetary Policy Committee (MPC)? Has MPC overlooked inflationary concerns?

I would not say overlooked. They have taken it in their stride. As the picture is emerging in India and globally too, inflation is less of a worry. When it comes to short-term supply constraints in India, particularly edible commodities, availability gets highly skewed during the interim period between crops. These spikes are expected. So, RBI has taken a realistic position that these spikes and dips are necessarily reflective of the seasonal changes also, except as I said in the case of fuel, it is well within the understanding of the Indian economy and the way in which the seasonal cycles operate.

India leads developing economies in attracting FII and FDI. Is this because of cheap money floating in the global financial system or India’s inherent strengths?

Across the world, there is realisation that global value chains cannot be put at risk of any kind of unforeseen events. An unseen event is something which you cannot take into calculation, but, in an unforeseen event, because of opacity in some areas, when economies or countries or governments operate less transparently, when they are opaque about their policies, about their governance yardsticks, about the way they deal with investments or businesses, that leads to a lot of shaking up of businesses.

As a result, you find a search for destinations that are transparently governed and far more predictable. By all those considerations, India is definitely a favoured destination. Not only that, the way in which during the pandemic, while attending to relief and handholding citizens, the government has not shied away from systemic reforms, gives confidence to investors who are looking to shift from less transparent to a more transparent destination. Therefore, production moves from those areas to us.

In the last six to eight months, we can see a shift happening. Drawing investors like a magnet, the PLI Scheme announced for 13 champion sectors has had a profound impact in terms of investments coming in and building confidence about India.

So, we are giving certainty and incentive for coming and producing here because we have a large domestic market. The surplus, if at all, has to be exported. So, India is seen as being administered and governed by people who understand business and respect business. Therefore, in order to make business possible, we are doing everything it will take. We have taken policy measures—FDI has been opened up, many sovereign and pension funds from abroad have been attracted due to fiscal concessions that we have given.

In terms of attracting global players and instilling confidence about India, how has the annulment of retrospective taxes helped, and has there been any movement so far from the affected parties?

Yes, they are engaging with us. The rules and other things have been put out. The law itself is self-explanatory. Even for those who want to come and settle the matter, they know what is available.

What are your concerns over the U.S. Fed’s tapering?

Both RBI and the Ministry of Finance have definitely been in consul tation and are keeping a good watch on what is happening here and also on the measures that the U.S. Fed is taking. So, whenever it happens, we are ready because we are looking at the learnings from the experience in 2008, and readying ourselves.

GROUND-LEVEL INITIATIVES

Regarding the mass impact your initiatives had at the ground level, what moves made the maximum impact during Covid?

We said, first let’s look at the lives and livelihoods, which is very critical as it gives immediate succour to the underprivileged. We gave free food, put some cash directly into accounts. We ensured that senior citizens, divyang and women were given money, directly into their accounts. One can give a lot more but whatever little we could we gave immediately. The question is, you give dry ration, but how does it get converted into food on the table? We also gave up to three LPG cylinders free.

On livelihood, it was a sorry thing to see migrant workers walking with their families and all their possessions. Immediately, the government converged nearly 16 schemes and addressed the 118 districts where over 25,000 migrant workers had already reached. In these schemes, we said the entire amount could be exhausted in those districts before October 2020. This ensured livelihood for all those who went back to their districts. I added ₹60,000 crore to the budget estimate of MGNREGA.

Even as we were talking about the lockdown, when the prime minister announced it for the first time, construction workers who were located where major projects were going on were immediately given cash. Since they could not even go outside because of Covid restrictions, they were given money there itself. Government supplied grains to people who were there and employers were told to give them cooked meal with the grains supplied to them.

With lives and livelihoods taken care of, it was now the turn of businesses. Under ECLGS, liquidity was provided with term loan portion and working capital assistance to help businesses keep going. No additional security was needed. No collateral was required.

Only when businesses said they did not need it were they allowed to be outside the scheme. Otherwise, instructions were issued that banks did not have any business to reject anybody. I monitored this on a daily basis. By evening banks would give me the record of how much has gone from each branch.

And that was why I think the entire amount disbursed under ECLGS could be expanded. ECLGS reached up to four successful generations within a couple of months. Now, I have expanded it with another ₹1.5 lakh crore, just to make sure that anyone who wants it can still get it.

So that was one stimulus that really helped these sectors. Agriculture infrastructure also got money. Nabard was given more money to reach out to farmer producer organisations. NBFCs, SHGs were given money. The long and short of it was that we went little by little in stages but covered most segments and that I think was supposed to be the core to the story.

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