Finance secretary Ashok Lavasa, who was environment secretary at the time of signing of the Paris Climate Accord, says that the US pull out from the agreement will not impact India’s actions, that it is committed to. In an extensive conversation with Santosh Tiwari, he also makes it clear that the monetary policy actions are fully in RBI’s domain and there is no confrontation between the government and RBI on rate cut.
The US pulling out of Paris accord …How will it impact India?
India had taken part in the Paris dialogue and convention agreement in a very constructive way and our approach was that the basic principles which are enshrined in the UNFCCC have to be maintained. The development needs of the developing countries has to be respected. The obligations which the developed countries had taken upon themselves should be met. Overall India’s very constructive approach was that climate change is a global issue and because it is a global issue, it requires a global plan of action. It is possible for one country to take all the corrective measures for mitigation. Even after taking those measures, that country is not guaranteed that it will not suffer the ill-effects of climate change. I think on many occasions India has made it very clear, including the prime minister, who said that we are committed to taking action against climate change. Not because we are part of this global combat, but because we seriously feel that India as a country and its people, are all vulnerable to the effects of climate change. So, for them as well as for our future generations we are committed to take whatever action is required. At the same time, the climate change has taken place because of the side effects of the development process which was undertaken by many countries for the last hundred and fifty years. Developing countries are a part of that development process. They may have been left behind, but they are entitled to that. So, basically climate change is a consequence of the development, the kind of development which was pursued by those countries. We are not saying that we want to pursue that kind of development, but certainly, we want to meet the aspirations of the Indians, that they want to grow and prosper. India has always stated that you have to make a distinction between lifestyle emissions and livelihood emissions. So, basically India’s stand was that we will continue the process of development.
But in this process we will pursue the most-environment-friendly technologies which are available in the world. We are willing to pursue those technologies. But sometimes, we might not have access to those, and sometimes we might not have enough capital to access those technologies. So, wherever in the world these are available and wherever the resources are available, those resources and technologies should be employed for the betterment of developing countries, and in this developed countries have to fulfil their part of the obligation.
So, how does this US pull out affect this whole process and the impact it will have on ground?
As far as India’s domestic action is concerned, I don’t think that this should effect. India is committed to taking action within whatever resources are available. In fact, whatever India has committed, the national determined contributions that India has committed, we are pursuing them in right earnest, even though the Paris Agreement has still not come into the force. But the earlier commitments which were made by India, the UNEP assessment or whatever assessments have been made, it was on target to achieve its goals. Similarly, we are already pursuing the contributions that we have committed to this time. The most ambitious renewable energy programme anywhere in the world, is going on in India and that is a very key component. India will continue its own action. Although the pull out by the US would certainly be a setback on the global effort. A country like the US which is the biggest emitter today, and historically, has to take responsibility for making their contribution in this global effort. Today, it is not clear what responsibility they want to assume. The picture is a little hazy and certainly perceived as a setback to the process of global cooperation.
Prime Minister Narendra Modi has hinted at the possibilities of a change in the financial year from April-March, at present, to January-December. If this is being attempted from January then the whole budget process will have to be advanced accordingly. How do you plan to do that?
The report of the panel on this is under examination. The final decision will be taken only after that examination is complete. But in terms of…there have been reports in the past also … a lot of analysis is already available and there are various viewpoints about the financial year that is followed. As far as preparation is concerned that would be in the form of legislative change, reformatting some of things and starting the preparatory exercise for budget-making early. Last year, we demonstrated that. We had to advance the FY18 budget by four weeks. Once the decision was taken we were able to do it. Let the final decision be taken and then the whole process will start.
You don’t see any difficulty in doing this (January-December financial year) from next year itself?
Well, the analysis which we are carrying out will bring out what kind of preparation will be required and what will be the time required for that.
RBI has avoided a rate cut in its latest monetary policy. How do you see this? How important is a rate cut at this juncture?
I think the Reserve Bank of India is a very responsible organisation and they are responsible for making a sound monetary policy. They take into account all the data which is available and they make their assessment and accordingly through a discussion in the monetary policy committee, they come out with the policy statement. It is possible that various segments of our society have their own assessments and expectations. It is not possible for any policy to fulfill all expectations. So, even in this case there would be people who would be expecting something else. The government had its own analysis based on similar set of data, but the assessment of different people may be different. Ultimately the organisation which is responsible for taking the decision, they have to go by their assessment and their wisdom. So, we have to respect whatever RBI has decided. They have already suggested that if the situation so warrants then they would look at the whole issue again.
Don’t you feel that to spur the GDP growth to a sustainable 7.5-7.8% or beyond, rate cut could be an important ingredient?
Investment always becomes more attractive and affordable if interest rates are low. From the investment point of view, a lower interest rate regime is always welcome.
In the GST regime, proposed to be implemented from July 1, the whole government finance part, indirect tax collection and assessment will see a big change. Is the government looking at a 1-1.5% push to GDP growth from the current GST structure?
If you look at tax collection figures in 2016-17, there has been an impressive growth both in terms of number of taxpayers and in terms of gross taxes collected, whether it is excise, customs, service tax or income tax. Total tax collection has gone up by 18-19%. And, in central excise there has been more than 30% growth. I think the tax compliance seems to be improving, the ratio of tax to GDP is improving. With the coming in of GST and with movement of goods becoming smoother, and with tax compliance mechanism becoming transparent and simpler than what was in the past, and with the benefit of the input credit, which goes along the chain, it can be safely expected that this will give a boost to economic activity.
Demonetisation has impacted growth in fourth quarter of FY17. It might not be totally because of demonetisation, but now do you feel that the impact of demonetisation is completely gone?
Given the pace of remonetisation… it’s almost complete, 87% of the money is back in the system. Whatever effect was being attributed to this sucking out of liquidity that should no longer hold good, and therefore, I think beginning of the first quarter and throughout this financial year, we see a rebound which will take place in the economy.