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economy | IST

IBLA 2019: Modi government succeeded in restoring credibility of economy, says Arun Jaitley

Narendra Modi government at the centre has succeeded in restoring the credibility of the economy and its decision-making process over last few years, said finance minister Arun Jaitley.
Jaitley said he had a lot to be satisfied with over the last five years with the government's achievement.
The opposition 'mahagathbandhan' (grand alliance) is a club of 'nawabs of negativity' and the only 'glue' of this diverse grouping is its opposition to one
man (Narendra Modi), Jaitley said at the CNBC-TV18 Indian Business Leader Awards on Thursday.
"The nawabs of negativity may come together but that is not something that will carry credibility as far as people are concerned," Jaitley said,
In an exclusive interview via videoconference from New York, Jaitley also spoke the upcoming budget, differences between RBI and the government, and the economic measure taken by the centre, among a raft of other topics.
Watch the video here:
Edited Excerpts:
I know that you are busy preparing the budget. Is it going to be vote on account or is it going to be something that will surprise all of us the market especially?
The convention has always been that the election year budget normally is an interim budget and ordinarily there should be no reason why we should move away from that convention. But then the larger interest of the economy always dictates what goes into the interim budget and that’s something which cannot be discussed or disclosed at this stage.
What are going to be the priorities that you intent to focus on? You said that ordinarily it’s a vote on account but you need to factor in the considerations of the economy. Are these ordinary times or are these unusual extraordinary times that merit a change in convention?
It entirely depends on what the existing situations are. If we look at the big picture, there have been successes that we have seen in the last few years. There have also been challenges and therefore without getting into the specifics because that would be disclosing the mind into which we are working, some of those challenges cannot afford to wait and therefore there would be a necessity to address some of them. It has happened in the past and therefore we intend working within the parameters of the conventions as they exist.
There is a lot of talk around the possibility of fiscal expansion and as recently as a blog that you wrote about 48 hours ago. You said that you pride yourself in the fact that you stuck to the path of fiscal consolidation and fiscal discipline. Do you believe that the situation today warrants some fiscal expansion?
I personally always had a view that in a larger context fiscal prudence and fiscal discipline is something which gets rewarded in the larger interest of the economy. Of course, there could be unusual situations where you will have to fill the gaps in certain areas and you will have to increase the expenditure but so far, now we are very close to completing first years of our first tenure and we stuck to that line.
The governments in the past have not stuck to it. We have seen the consequences, the consequences of this on currency, consequences of inflation, the consequences of investment, on the ratings and therefore when we came to power we inherited a fiscal deficit of about 4.5-4.6 percent and gradually the effort has been to be on a glide path and therefore slowly but surely we have been moving on that glide path unless some unusual situation arises. For instance, last year was an unusual situation where we have the GST revenue only for 11 months and we had to make the expenditure for the full 12 months and from 3.5, I intended coming down to 3.3 last year itself.
But because of one month absence of tax revenue of the GST, we couldn’t afford to do that. So that was an exceptional situation which I am sure the market also understand and I certainly do understand the importance and of course, deviations are possible only if extraordinary circumstances exist and those are extraordinary circumstances with analysts, with local players, domestic players are relatively easier to understand.
When you talk about these extraordinary circumstances, would addressing the agriculture sector, would addressing the needs of the farmers today which is being speculated about that there is a multipronged package that is likely to be announced shortly perhaps even in the vote on account, I know you cannot say much on the timing of it but is that something that would require a significant amount of allocation in terms of funding and is that really something that the government is working towards?
I cannot announce any decision but all I can tell you is that the farm sector, from the very data itself as it indicates, has been facing challenges. The challenges are of a nature that our farmers have hugely increased productivity and we have moved into a surplus era. Now the management of that surplus is constituting a broad challenge for us for the last several years.
The prices have fallen and even today if you look at the last few months food prices is something which has gone down in India and that reflects the kind of money that the farmers get and therefore whether it’s a situation like natural calamity or it’s a situation like a drought for instance or it’s a situation like a stress in a particular sector, these are all areas which cannot be considered any form of populistic expenditure. Markets will never understand if you just act for the sake of populism but if it is a larger interest because of a compelling situation that develops, I think that is a logical thing which markets will also tend to understand.
I was having a conversation with some of the business leaders and the consensus on the panel of bankers certainly was that there is a need for a cut in both repo as well as cash reserve ratio (CRR). Do you believe that that is the need of the hour?
I am very clear what my views are but while giving you an indication of that I would refrain from expressing my views because you cannot have a real rate of interest in India which is larger than anywhere else in the world and I am sure now that the RBI has been consulting all the stakeholders, they probably have a better field of what is the real situation of the economy.
So you are saying that the RBI is much better versed with the economic reality today because of stakeholder consultations but what about consultations with the finance ministry and with North Block?
The RBI and the government of India have always been in extensive consultations and that’s not something on which I am going to fault the RBI at any stage or the government for that matter. Consultation is necessary because the government is perhaps one of the most important stakeholders in the management of the economy.
If those consultations do not take place then, of course, you will have a very serious challenge to the economy which develops. The only issue before us and even there was a controversy in the media than reality. We had two conflicting viewpoints, we had diverse viewpoints and that’s not something for the first time which has happened. Governments in the last 70 years on several occasions have had viewpoints which were differing from the central bank itself but the idea is they have to consult, they have to talk to each other, explain the point of view and finally each of the institutions acts within the limitation of the powers that are in its own domains.
The fact that you address the RBI as an autonomous institution, I respect their autonomy, that these are concerns to the economy. Flagging those concerns is not a breach of autonomy. You are not telling a third party, you are telling the so-called autonomous institution that this is the parameters in which you must realise and act and then it’s up to the autonomous institution which way it acts. Courts which are government institutions, you go and plead your case and that doesn’t mean that you are infringing the independence of the judiciary. So similarly in the consultation process, you are entitled to freely and frankly express yourself.
I am going to freely and frankly express the report card as per your own assessment of your government. We were talking about the hits and misses and while I know that the government puts out a long list of hits, here on the panel one of the big misses has been strategic disinvestment. This was something the government said it would go through with but at the end of the five years, we haven’t seen that taking off. Let me ask you for your honest assessment on both the hits as well as the misses?
If I look back the last five years, I have a lot to be satisfied with. If I look at the future, I have a lot to be still impatient about. If you ask me what happened during the last five years, I think we succeeded restoring the credibility of the decision making process of the Indian economy from an economy which was considered to be suffering from policy paralysis, fragile files and so on.
I think even the idioms change. You are now being referred to as a bright spot as far as the global situation is concerned. Therefore, to become one of the fastest growing economies in the world to have decisive leadership, to take certain steps which are in the larger interest of the economy. If you look at the kind of steps, I need not repeat the kind of reform steps that we have taken. Some of them have been understated, some have been overstated; the GST for instance, the IBC, these are all overstated steps that we have taken and everybody knows.
However, look at the huge change which has come in the direct taxes. Today, you have the whole system which is one software, you had an interface which has gone, you have 99.6 percent tax returns which are assessed as they are filed, you have people getting refunds online.
There is a huge change for what was considered to be one of the most corrupt departments in the country. There has been a huge transformational change and if you look at each one of it, look at Aadhar for instance, it was a challenge on the ground that it violates privacy but the kind of money that you are saving annually from Aadhar, making funds schemes after schemes beneficial to the poor as far as Indian is concerned.
You have subsidies, unchannelised subsidies which have all been eliminated and the savings are resulting in a more fruitful expenditure. I think to maintain a reasonable level of growth to keep inflation under control, to keep fiscal deficit under control, our macroeconomic parameters, I wrote about it 2-3 days ago, have been better than any comparable government during 5-10 year of tenure in the past.
I think the biggest achievement has been that while we have gone ahead with a large number of difficult economic reforms and maintain steady rate growth, we have been able to use the advantages of that additional revenue that we have got both because of the revenue reform and also because of the overall reforms and the growth in the economy and transfer a large amount of resource both to infrastructure and also to the poor of this country.
In the past governments transferred slogans to the poor ‘garibi hatao’ was a slogan; they never got money, they never came out of poverty but here you have rural roads, you have rural housing, you have rural electrification, you have rural sanitation, you have modern cooking systems. Now look at what we have done and this single achievement would make any Indian proud. Just about 38 percent of Indian were insured either through governmental programmes like CGSH, public sector or corporate facilities which are granted or through personal insurances that they would buy.
So you had a situation where almost 62 percent of India was uninsured, we were uninsured society. In one go the money being served through Aadhar in all these other schemes, we have been able to create the world’s largest healthcare system for the poor. Today, is January 17, so it’s been 117 odd days and you have close to 8-9 lakh people who had cashless hospital treatment and I anticipate that in the second year of this scheme or the third year of the scheme we will have 1 crore families being treated for hospital expenses free of cost.
So you suddenly have 40 percent added. So from 38 percent you suddenly move to 78 percent insurance society as far as healthcare in India is concerned. Budget after budget we speak about education, healthcare etc. This is a government which has actually delivered. Look at one single achievement. This is the first five year tenure of a government where not one rupee of direct tax or indirect tax has been raised. On the contrary, taxes have come down and what was only theoretically discussed in India we have increased the tax bases and therefore increased the revenue generation as far as the country is concerned.
Having said this I think things that we are really satisfied about - what is it that concerns? Now I have mentioned 3-4 things. One, I think even though we have the satisfaction of being the world’s fastest growing economy, faster than any other government in the past I don’t think 7-7.5 percent growth rate would suffice and that is why I said I am impatient, we have to cross that 8 percent barrier and to cross that you have to get into those areas which are the un-reformed areas as far as the Indian economy is concerned.
You will find in agriculture, you will find in state transportation, I can see Piyush Goyal sitting there, he started in the railways, I think he needs other few years to complete that whole process and that really can add to the growth process as far as India is concerned.
Second, India is becoming very aspirational. I recently read a study which said that by 2025 almost from 15-25 that is in a 10 year period 29 percent will jump to a 44 percent middle-class in India so that is the rate of change which is taking place. So India is becoming far more aspirational and therefore you need really work hard in terms of education, in terms of job. Now, these are areas of future challenges.
I think the two things that worry me. One, of course on these economic issues before a forum like this to have a discussion or a debate really make sense but should this be reflected adequately also in the political debate that takes place. I think this still has to occupy the centre stage. You can’t have a just a sloganised policy domain which seems to be the hallmark of certain political groups where slogans over takes some policy and that really in the larger interest will never help the large interest of the economy.
You see particular, I only hope that the six month run up to the general elections itself is not indicative of the quality of the debate but I hope that this debate doesn’t really turn into policy because if it did all the aspiration that we have for the future will actually receive a setback.
Last, I think the concern also is that India needs now and now that we are entering a general election arena we need to have a continuity of policy stability, decisiveness, ability to take up challenges and not something which is weak, fragile sort of a combination where survival is the first priority and policy probably comes very down the priorities.
You were talking about your concerns clearly from your statement that the Mahagathbandhan is not a concern as far as you are concerned and also the fact that there is much more united opposition and as far as the NDA is concerned we have actually seen on the last count about 16 of your allies quit the NDA. So a united opposition versus NDA where allies are sort of leaving the ship is that not a challenge or a concern?
Let me take up the challenge with a question first. The challenge of your question is what is it that is going to decide the fate of the next election. The first consideration is going to be leadership and I think that something where we score. The kind of individuals who have almost state their claims; the claim in from Uttar Pradesh, from West Bengal, from Telangana and from the privileged family of Delhi.
I think if we look at it the situation looks fairly scary. The second is the performance of the government which is always a test in an election. I think there is a lot we have done which we have reason to be proud of. The third is, of course, the narrative. Now whichever way and I am one of that falsehood can never constitute a permanent narrative. Falsehood not only collapses it falls apart. Last is that as against leadership, decisiveness, performance, future potential well our answer is simple arithmetic and that arithmetic is based on only one premise that is not ideological similarity, that premise is not an economic programme in common, that premise is not a common vision of how to bring a country together, the premise is not that we have an individual who is a leader; you have a multiple claimants.
The premise is that we have a politics which is negative in character and that negative politics is we want one man out. Therefore, on that negativity of wanting one man out we have all come together and therefore that is the whole premise that we have as far as India is concerned.
India, as I indicated to you earlier, is a highly aspirational politically conscious society and such societies never opt for a suicidal cause. They will opt for a tried, tested and established leadership. The Nawab’s of negativity may come together but that is not something where they are going to hold together and carry much credibility as far as people are concerned and I have not the least doubt in my mind that in a battle between chemistry and arithmetic, politics is something where chemistry always succeeds. It happened in 2014, it has happened elsewhere in the world and I am quite certain it is going to happen in India.
You have given us the new one compulsive contrarian and now the Nawab’s of negativity that is the new term that you have coined here this evening. I know you have to leave so let me end by asking you what will be the priority going forward? This election season promises are going to be made I would imagine that there could be some degree of expectation management this time around given what we saw happened post 2014. What should we expect? What is going to drive the narrative?
The narrative is going to be driven by predominantly two factors. There is one segment of society which has to be pulled out of poverty and they have also got a message loud and clear that it is only a fast growing economy, a stability of policy, a stable government, a decisive leadership which is able to run the country which can deliver these resources to them.
Now people - let me just give you an example -- If 8 crore families transform themselves in their cooking methodology, if crore of them got a roof on their head in villages, if from 39 percent to 98 percent people get rural sanitation if crore of crore of them got proper sanitation facilities in their houses, they got electricity in their houses and if you saw across the board this is not a government which has troubled or put pressures in terms of high taxation or any segment of society and therefore much than the propaganda against the GST went on today the message is loud and clear it has been the most consumer friendly measure that has ever taken place in India which actually brought the rates of taxation of 100’s of commodities down.
So the proof of pudding is in the eating. I think the narrative therefore is you need a stable government, you need a decisive and a tested leadership, you don’t need chaos because a chaotic government will never enable India to grow it will never enable India to transfer the resources that the country has for the welfare of the poor in this country.
Nervousness or trepidation or confidence ahead of the Vote on account as you get ready to prepare it?
We have been too long in this game to have any form of nervousness as far as this is concerned. We are confident, as I said we are proud of our performance. We have done reasonably well and therefore there is no reason why we should have any jitters either on the eve of the vote of account or for the matter on the eve of elections.