Before the Budget, you had hinted that this will be a once-in-a-lifetime Budget and this indeed is a budget which was centred around health, hope, and growth. Industry has welcomed it and stock markets were really on a tear today. You often say that crisis always gets the best out, so is this the best of team Nirmala?
Well I think it is the best of our Indian entrepreneurs in spite of all the challenges which Corona threw at us. Once the lockdown was being slowly lifted, people went about trying to get back to normalcy and the way in which they have gone back to restoring their businesses and activities, it was a duty of the government to only facilitate. I think the credit goes to the Indian entrepreneurs, small, nano, micro, traders, manufacturers, exporters, farmers and literally everybody has gone back to what they are best at doing and that is where the revival story began. It has now continued for at least three full months and the GST collection tells you the story. It is only for us now to make sure that we spend the taxpayers’ money responsibly but in a big way where the multiplier is and that is where capital expenditure in building infrastructure has taken a priority.
Do you think this Budget is an example to everyone in the world that growth can come back without increasing taxes and with asset monetisation? Is that the spirit of the Budget?
In a way it is because we did not want to fund this stimulus. We did not want to fund this spending on infrastructure through increase in taxation. People need money in their hands but money in people’s hands can be through various different ways — if they get their job, if orders are being placed for their manufactured product and even if they are a small manufacturer, money reaches there. So we took a conscious call that we shall not tax them further and draw away money which is in their hands.
I know there was a lot of speculation in the market about a cess which will come in the name of the Corona and so on but we never thought of any that, that was never on the table. Sure people told us to print currency. We have not even gone in that route. A responsible borrowing calendar is what we have prepared ourselves for and with that borrowing calendar which is quite huge, we also made sure that a glide path is given for the fiscal deficit. Otherwise, prudential management would not be the principle and Prime Minister Modi is known as much for development as much for the very prudential ways in which he manages the economy, the finances and so on. Gujarat in his time saw development without compromising on the state’s finances.
The assumption of tax growth rate of 16.5%. Do you think this is a conservative estimate because the Indian economy is back, corporates are increasing capex, GST collections are hinting at a recovery. Will I be wrong if I say that in all likelihood, your tax collections will beat your forecast and fiscal deficit could be much lower than what you have indicated?
That will be good use, wouldn’t it?
Are you being conservative because this is a Covid year?
Not really being conservative, but I am being realistic.
You have always said the Budget has two parts – part one which focuses on next 12-16 months which is maths and allocations and then there is a vision statement. Now maths is something which you have presented. Let us move to the second part which is the vision statement. How do you think this Budget will ensure that India moves from the trajectory of not survival to revival but from survival to flourish?
I think if you are able to give policy consistency, if you are able to prove that this government is not desperately wanting to generate revenue through taxation but generate revenue through a better economy because that in any case bring in new indirect taxes and so on; if you are announcing what you want to do, that there is a consistency which the industry wants. Industry wants certainty, industry wants certain clarity in policy and industry wants you to show that your intent is not always to make quick money through taxation. By bringing a comprehensive facilitation from the government through consistency in policy and being predictable in a way. So that is the approach which I wanted to take and that is where we are.
The success of the Budget also depends on the massive borrowing programme and for that, interest rates have to remain low. Since the Budget is growth oriented, it will have a multiplier impact. Do you fear that somewhere inflation could really reset all the assumptions?
I will keep a watch of course but I do not think I will worry about inflation. When there is definitely an increase in consumption, when there is greater demand, inflation is bound to be a bit going up and there is also a lot of liquidity in the market. However, that is something which I will worry about when there is no growth at all and therefore towards growth, I will take smaller risks. I will manage it as and when it happens but my emphasis is give a push for growth.
The other hallmark of this Budget has been transparency. I looked at the Budget document – food subsidy is now part of the Budget. There are no large provisions which you have done. There is a Rs 30,000 crore contingent liability which you provided for. Do you think this level of transparency is the most important highlight and is this a big departure from the previous Budgets?
I have been trying to step by step increase the level of transparency from July 2019 budget itself. The IGST dispute had prevailed quite a long time because a certain sum of money which was due to the states had already gone to the consolidated fund, had created a lot of worry and from then, I started going into the depths of what has happened, not just in case of IGST but also in the ways in which amounts are camouflaged. So it has been a genuine attempt to make the Government of India’s budgetary statements a lot more trustworthy, a lot more honest.
I am not saying the earlier attempts were to be dishonest but you should know what is in there and what it is. In order to reach that, I looked at this time as an opportunity and therefore emphasised that the team should work to clean up the government statements and make sure that budgetary provisions are made. One does not provide it from elsewhere and hide it or put it unnoticed. I do not attribute any dishonesty, I do not attribute any malfeasance in their practices or in the ways in which earlier things had happened. But it is reflective of the transparency with which the government under the prime minister’s leadership functions and that should also be reflected in the Budget statement and therefore we did this.
The sector which has seen the maximum reforms is the banking sector. You have indicated that there is going to be a concept of a bad bank. How realistically do you think this will be implemented because this also requires a lot of procedural work?
Yes and we have been working together with RBI on this. The banks among themselves are willing to run such a holding company. The government will of course be giving some cushion of help from our sides. If the banks themselves sit together and devise a way, that is the way in which they will get implemented also. The Reserve Bank and the Government of India are together with them on this.
As things stand, banks do not have the wherewithal to carry forward with selling and realising from the NPA assets, the bad assets. Unless they have the expertise, unless they have dedicated team of people who can do it other than doing their banking function, that is never going to be achieved and we cannot go on giving provisioning for those NPAs. As the values keep deteriorating and if the erosion in value is continuously happening, banks are taking bigger and bigger haircuts. We thought the best way was to have this holding company idea was through the Reserve Bank to make it possible for banks to cull out all the bad assets and put them there. From there, in the process driven way of all the asset reconstruction companies (ARCs) which are private companies who can come in and bid for those asset stake and from realised value, the banks can get whatever they can get.
Of course, there will be a haircut but at least they will be out of the bad assets. We have looked at workable ways of establishing this asset reconstruction model and I am very hopeful that it will definitely do good for the banks.
Do you see this materialising in FY22?
I would like to have it done this year. I will put all the efforts in it.
You have also approved an idea of a development infra fund. These are things which have been tried in the past and the success was not very great. What are the guard rails which you will put around so that the entire process is smooth when it comes to infra financing?
The first thing is even while we were working on this idea, the lessons learned from the failures of IDBI were definitely in our mind and that has played a role in the way in which we are going to devise this.
We are also making sure that the amendments that I am going to bring in for establishing the DFI will have a place for the private sector to also play their role. So statutorily, we will be providing for private sector DFIs because in today’s aspirational India with the economy revving to grow, the demands for long-term financing for infrastructure cannot be met with just one institution. There have to be a lot of competing institutions bettering their performance each time and being able to provide that fund competitive rate and understanding the long term lending risks.
Therefore establishing a DFI is not a business on its own. One has been seeing DFIs earlier as you rightly remind us, but this fund will have to compete with the market. It has got to be run professionally. And that is why I said the amount that I give is what is going to be used to leverage greater resources from the market. I have pegged it at an ambitious Rs 6 lakh crore in the next several years. So, hopefully it will succeed.
Some are questioning the disinvestment target because this year because of Covid, the numbers were not reached but given that there is LIC, there is Air India, there is BPCL — can I safely assume that there is a very high probability that you will be able to achieve that number well within FY22?
We have just been realistic about it. I do not think it is either overestimated or underestimated or anything we have just been realistic.
The indication from the government is the entire disinvestment process is going to be a rolling process. Are we looking at similar numbers in the coming years also?
We have announced the policy for the public sector enterprises. Other than in the core sectors where we have notified that we will keep the presence of public sector enterprises to the bare minimum, all others will have to be disinvested or amalgamated to become larger, survivable, sustainable, scalable institutions of size.
So we will be having a very steady policy for the next few years. It cannot happen all in one year but if private sector investors, from India and outside, also know that these are here, the market also gets ready for that. Therefore, in a hurried manner underestimating or overestimating any one particular enterprise will never happen. These are there, people will start showing interest and gradually they can come up.
Under your leadership, banks have consolidated. Now the number of big banks is less than six. You have also mentioned that you are looking at selling majority stake in two banks. Will that be the shape of PSU banks where five, six relevant banks will be there?
I do not see an India without public sector banks but what scale, but what size, are you going to have in a lot of these banks? Many have been there for a long time even if they are not doing business at all or even if they are in no position to revive. Are we going to help consolidate and have many more state banks in India? That is what is the need of the hour. We want large banks in the public sector which can undertake many of those typical bank functions that they should do and we are in favour of that. But at the same time, just the sentiment that it is a public sector bank is not enough. We cannot leave banks which are just not rising in spite of all the support that they receive.
Some public undertakings like Coal India, BHEL, BEL, State Bank of India, are jewels but from a market standpoint, investors do not give them their true value. Are you looking at working closely towards changing the perception of some of the PSUs because more than business, there is a perception problem there?
Of course, but there should be such professionals who will help the ministries to understand how to realise those values. It is not the finance ministry’s function, it has got to be done by the respective ministries with professionals sitting and advising.
Honourable Prime Minister came up with his vision of Made in India for the world. How excited are you about the PLI schemes and what to your mind has been the initial response to the schemes which you have rolled out?
I think there has been immense interest in the PLI schemes and several industries are asking for similar schemes for their sectors. It has invoked a lot of interest, it is showing meaningful results, it is not going to be a subsidy to someone who can otherwise produce. It has been a very well received scheme and I can see the results coming.
Can I safely assume that now we are in a stable tax regime and taxes may not go higher and are also unlikely to come down in a hurry?
I have not applied my mind about bringing rates or increasing the rates because I clearly took it off table for this Budget. We will have to see how we can handle the next but I will certainly continue with a certain consistent policy rather than have a mercurial one which changes every year.
How do you want this Budget to be remembered?
As a Budget which actually helped the economy to revive and also give a message to the world that India and its entrepreneurs will do everything that they can to show their strength. It is like the cricket team in Australia. Whoever thought that they will make a difference? They won the test series and that drive to compete and that drive to succeed just needs that little handholding, which we in the government are willing to do. We shall do that and that is what this budget should be remembered for.
