Spending on infrastructure creates a capital asset, employment, demand, and other benefits, according to Nirmala Sitharaman


Your budget has been dubbed “one of the best budgets in recent memory.” Were you anticipating such a response?
Our only concern was to ensure that we produced a budget that would aid the stimulus. I believe that between the PMO, the Finance Ministry, and each department responsible for its own affairs, we had all spent a significant amount of time considering what could be a meaningful and impactful budget. My main goal was to make a difference in the economy. As a result, I didn’t consider whether it should be a budget like 1991 or a budget like 1997. None of that is true.

That’s what there is to it.

It’s safe to assume you don’t mind the encouraging answer…
No, because you don’t need to be overworked by any force, agency, or sector in response to a larger budget problem. As a result, it’s understandable if anyone said, “Look, I can’t afford to lose my sleep based on the reaction.” However, when it clicks the right button even for the stock market, and when I say stock market, I mean the entire market, including shares, bonds, and everything else, it indicates that you’re possibly on the right track. There is no way that it motivates you.

A large number of second-generation reforms have been implemented by the government, with some of them being revealed in the budget. Can you anticipate retaliation?

No, see, I don’t believe any of what was said in the budget was said in an adversarial manner. As a responsible government, we must take steps, and I am aware that, while money from taxpayers is needed for welfare activities, it should also be directed toward activities that contribute to the economy. I’m not accusing anybody, but if, for example, a public-sector undertaking has reached the point that I have to bring taxpayer money into it and do everything I can to save it, not for a year, not for two years… Tax money has been injected to restore them in some cases for decades. But, even though you are still unable to recover, the economy still sees a need for more businesses like yours…

Businesses and professionals in the economy believe they can do a better job of running that agency, the asset, that public sector unit, who are basically Indians for all purposes, Indian businesses, Indian investors, who believe they can do a better job because each of these units is needed.

We need more steel-making units, more aluminum-making units, and so on. But does it add to the strength of the economy if the government sits over them and does not contribute to the economy by better producing competitively priced steel or better-quality steel, or does it have to be shut down, saying no, I can’t run it, I’ll close it?

Is it making economic sense for the government to offer it to them if there is talent outside, if there is capital outside, if there is desire outside to keep it running as a running enterprise? And openly, not because he’s my chacha, bhatija, or damaad, but because he’s my chacha, bhatija, or damaad. Is it not beneficial to the economy if people openly measure it for the value that it can gain, and then pick it up and do it in a transparent process? D Isn’t it supposed to save the workers that are already there?

There are organisations that must contribute to the economy. I want them up and running as soon as possible. I’ve tried many times to put money in the bank. It isn’t just this finance minister who has attempted to breathe life into them; many finance ministers have attempted to do so.

When we have tried too many times and are still unable to make a difference, would it not be safer for the economy if they were disinvested? And in an open, transparent process that allows everybody to see what is going on. And it will not be at the expense of those who are already working in the sector.

We would certainly have to negotiate with those bidders to ensure that the workers’ rights are protected, not only today, but even in the future if the pledge is to ensure that their benefits are compensated. This is something I would have to bear in mind. As a result, these are well-considered considerations. No harm will come to any segment, and no viable units will be closed. Also the less viable units will have to be resurrected at some point because the economy will need such products. But that’s where we are right now.

Is there a public relations policy in place to promote privatization?
This isn’t the first time I’ve mentioned disinvestment. And every CAG issues a report explaining what’s going on? Why is it lagging so badly? How do you improve productivity? Why don’t you bring in a little more? But where do you get more money while being unaccountable to Parliament? What are the benefits you’re getting out of it? We’ll need to speak with everyone. We’ll need to speak with everyone. We’ll have to explain to them that we’re not harming the interests of any particular group, as I previously said.

What will be the scale and reach of the privatisation of two PSU banks, which was announced as a big-budget announcement? Banking is classified as a strategic sector in the public sector enterprise strategy, so what is the bare minimum standard you’re looking for there?
All of this will be decided. It’s not like I’ll be able to say, “This bank does not suit my bill, so I’m going to throw it out.” That’s why we’ve just said the bare essentials. It could be four, it could be less, or it could be more. Each sector on the strategic list will be determined by the stakeholders, who will determine how many are important for the government to be present.

Which banks are you considering for divestment – those that are doing well and those that aren’t?
It’s not as easy as that. Our banks’ characteristics have been that CASA (current and savings account) deposits are plentiful in the east, whereas credit demand is plentiful in the west. Does this imply that I only use credit where credit is due? Or does it imply that there is ample credit here but no CASA? Do I proceed based on that score? No, then there would have to be a slew of factors to consider.

We brought together banks with vastly different capacities in order to capitalize on the synergies of both, so that a bank with a large network in one region can benefit, whereas a bank with a large deposit base can benefit even though it doesn’t have as many branches. As a result, it will have to be a combination of many factors.

The Reserve Bank of India published a discussion paper proposing that industrial houses enter the banking sector…
First and foremost, is this the first time the RBI has granted a bank to the corporate sector? What was IndusInd Bank before? So, this isn’t the first time, and I’m not speaking on behalf of the Reserve Bank of India. I’m not here to comment on the RBI report, and I don’t believe the RBI has even approached the government to say this is what we’re doing. It would be presumptuous of me to talk about it now. But the question remains: is this the first time we’ve discussed it in this country? It happened before, without even saying something. What is Bandhan Bank, and what does it do?

However, in the mid-1990s, there was an exception…
Exceptional, mid-nineties, whatever… It’s not the first time, so if it does happen, we’ll have to see what the RBI does about it. And, beyond that, the issue of whether or not foreign firms will be permitted is one for the future; I’m not going to discuss it now because it isn’t even on the table.

Has there been a breakdown of coordination during the farm agitation?
The government communicates with them on a regular basis. It’s on display for us to see. The Vigyan Bhavan is a public building, not a private residence. We haven’t closed the door on talks if they don’t end with a settlement within one or two sittings. Isn’t that a start and isn’t that enough to start a discussion if the government says, “Please speak,” and we’re ready and open-minded to tweak or amend anything? We are explicitly stating that farm laws are in place to help farmers. While speaking, the Prime Minister made it clear that he had small farmers in mind, and he also demonstrated how, at different times, all political parties have used similar words.

As a result, I believe the media should point out the opposition’s hypocrisy and U-turn. I’d like the media to ask them, “Why did you change your mind?” Your manifesto isn’t a haphazard declaration… promises made in Parliament, especially by the Prime Minister. I recall Manmohan Singh in relation to the state bifurcation of Andhra Pradesh and Telangana. So, why is Dr. Manmohan Singh’s word good enough when you’re talking to us about Telangana and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra and Andhra. Why does Punjab suddenly say no, it’s not good enough, despite having contract farming in its own state? Protests are the right of those who believe they have a valid reason to do so. That is something I agree with. The government, on the other hand, is open to dialogue.

I don’t mind if you get as much support from India as you like, from any corner of the country. You, on the other hand, are savoring a support system that isn’t based in India. Is it possible for the media to bring this to the attention of the public?

What prompted you to prioritize capital investment over cash support in the budget?
When you invest in infrastructure, you are creating a capital asset that will have a long-term impact on the economy. It provides you with immediate employment opportunities. It increases demand for key business goods and, as a result, pushes the virtuous cycle forward. As a result, I took this route.

In this budget, there is a total change in the trend on the fisc. What was the catalyst for this paradigm shift?
Isn’t it true that the way you phrased it limits it to the fisc? However, I see it as an opportunity to implement second-generation reforms. So, in order to move forward with the changes and the stimulus provided by financing public infrastructure, it establishes a clear path that the government cannot be the sole stimulator. In the medium term, the government cannot be the driving force for reform. It can’t be the only thing that keeps the economy running. It must be done in collaboration with the private sector. As a result, you’ll notice that when I set up an infrastructure project funding developmental institution, I include a public institution as well as a private-sector component.

When I look at banks and their assets, I realise that they don’t have the resources to value them because they don’t have the ability to clear all of the bad assets. They would have done it in the course of their other company, which is core business, if they were like trickles. So, rather than the government, I’m forming a financial institution. But even there, we’re bringing in private-sector institutions for equal valuation, market valuation, and accountability.So, you see, any time the government takes a move like this, we’re opening the door for the private sector to participate as well. We wanted to create an environment that was both accessible and private. But there’s the new course. That’s most likely a well-articulated paradigm change, in my opinion.

And that strategy, which I firmly believe and am very pleased with, represents the Prime Minister’s understanding and functioning of the Indian economy. This is precisely what he demonstrated in Gujarat, which we are now pursuing. And this is in line with the Jan Sangh’s and BJP’s belief that the Indian entrepreneur should be given as many opportunities as possible.

A study of the monetary policy system is on the way. Are you going over the 2-6 percent inflation target again?
We’ll have to go over it again to see how we want to proceed. We’ll take a look at it.

The finance committee has proposed combining the GST rates of 12% and 18% and switching to a three-slab system. What are your thoughts on the matter?
Such are topics that have been discussed in the GST Council for more than two sittings in very rudimentary early-day discussions. In the last two sessions, however, the time and schedules were deemed inconvenient. The fitment committee is working out the rate rationalization, GST, and looking at revenue neutrality as it was then versus what it has become now, item by item. I’ve stated in the council many times that this is something that we need to revisit with an open mind. We have shown to the council that, in more than one or two cases, we seem to be paying more refunds than collecting the tax due to inversions in the duty. As a result, the council is completely aware of the situation. We will undoubtedly discuss it as soon as the council deems it appropriate, which should be soon. I can’t talk to the council about whether it will be at the next meeting. We’ll have to wait and see.

The monetary policy committee (MPC) has raised concerns about high fuel taxes and how high fuel prices are contributing to inflation. Is there an argument for lowering fuel taxes?
It’s a product in which only one government – presume the Centre and a slew of states, or even just one state or one Centre – can’t do much. This is because no one can be blamed if they believed that this item could also be used to generate revenue. The Centre now uses a fixed rate, while states use a percentage value on an ad valorem basis. And it’s a bit of a mental game. I’m perfectly content to withdraw. Is that room going to be left empty or will anyone else move in? Assume one state enters, and every other state thinks to themselves, “Why not us?” because everyone needs money… I resigned to take a moral high ground – is the income going to vanish? After all, why not? Allow them to take it? But does it address the monetary policy committee’s final question? That’s the kind of complication I’m talking about. We’ll have to see what we can do.

The CEO of Cairn will be here shortly to speak with you. In the arbitration situation, what decision has the government made?
They must be heard by me. I’ve also given the finance secretary permission to talk. They will be met by him and his team. I have no idea what they’re going to say. We’d like to hear your ideas.

Has the government agreed to challenge the arbitrator’s decision?
Of course, the government’s right to tax cannot be challenged in terms of the broader concept. I’m not sure what they’re going to say to us when they arrive. I’d like to hear them.

Without any government funding, the proposed bad bank will be just like any other asset rehabilitation firm, so how will it vary from those already in place?
The approach you propose to me does not have to be the only one. Money is influenced by the government, and you have a brief respite. If it doesn’t work out, you’ll be disappointed because you saved, planned to run it, and then. It’s also how the RBI, the banks, and everyone else will look at it and establish a holding company into which these assets will be transferred. The holding company will then consider how to dispose of it, and we propose that private involvement be included as part of the disposal process. So, in that holding business, if any of the banks are bringing it together through the Indian Banks’ Association, it’s us. The banks are all government-owned institutions. The approach is something we’re working on with the Reserve Bank to see who would be more highly qualified to do it. It’s impossible to have it both ways. You can trust it because it is run by the government. However, the government is incapable of operating a highly technological, professionalized operation, so we’d like to work around that.