One of the most forward-looking finance ministers that India ever had, Yashwant Sinha is now heading the Parliamentary Standing Committee on Finance. The panel is now looking at a host of reforms the UPA government is keen to implement. Speaking to FE?s Bijay Shankar Patel, Sinha said that the report of the committee on Direct Taxes Code Bill and Insurance Bill is likely to be submitted in the winter session so the government could proceed further on the two important reforms. He, however, said that the states must be fully on board to implement the Goods and Services Tax (GST) and so the panel would be holding discussions with the empowered committee of state finance ministers to build consensus. Excerpts:
The GST constitutional amendment Bill is currently with the standing committee. But even after Sushil Modi (who is from BJP) has been made chairman of the empowered committee of state finance ministers, there is no consensus among the states. How do you see the situation?
We will now start talking to the state governments? representatives on the GST constitutional amendment Bill. We will also take up the matter with the empowered committee (of state finance ministers) and see the progress they have made on building consensus among states.
I strongly feel that the states must be on board on all issues pertaining to the indirect tax-reform initiative. You cannot implement GST without the support of all states. So consensus building is absolutely essential.
A few states like Madhya Pradesh and Gujarat are against the GST constitutional amendment Bill. And these states are ruled by BJP governments.
Not only them, even Uttar Pradesh and Tamil Nadu are opposing the Bill. Jharkhand is also finding it difficult to accept GST. So, Madhya Pradesh cannot be singled out. It is the original dissenter; they started opposing it from day one. But we will have to convince them. Either they will convince us or we will convince them.
For four years, the Centre and states are talking on GST but a consensus seems elusive. Now, do you think some serious efforts need to be made by the government or even by the Prime Minister to achieve a breakthrough?
Definitely, there is a case for such a mediation. But now that the constitutional Bill has been introduced and it is with the standing committee, we will do whatever we can to come closer to consensus.
Will you submit the report on DTC bill in the winter session?
Hopefully, we will table it in the winter session. We are making progress. We have done a lot of work already. I say about 60% of the work has been done. The balance 40% is something we will do during the recess period.
What is the status on insurance Bill?
Insurance bill is still pending.
So when would you be able to submit the report?
This session, I don?t think we are going to do it. But in the next session hopefully we will able to submit the report on the insurance sector.
High inflation has forced the RBI to raise rates several times. Do you see a slowdown in growth on account of this high interest scenario?
The global situation is worrisome. It is not helping (us). We are saying our exports have gone up by 80-90% on a rather low base of last year. But there are already signs of industrial slowdown. Investment is not taking place to the desired extent and manufacturing is going down. So, we are definitely in for a slowdown phase. How severe the slow down would be is anybody?s guess. The first quarter GDP growth rate is reportedly 7.7%. There are many people who are saying that we will not grow at more than 7% in the current fiscal. Even 7% is not bad but if we continue with this combination of policies (where RBI is forced to raise rates to contain rising inflation), then the going would be difficult. This policy will only intensify slowdown.
So, in view of the slowdown, do you see a case for opening up of more sectors to foreign investors?
India has a great chance of being a very attractive investment destination globally because the US is slowing down, Europe is in a crisis and Japan is also not doing well. India, along with China, is already being considered as an engine of growth for the global economy and this is the time when we should go out and attract foreign capital. Foreign investors are not so much worried about the FDI caps, whether it is 26%, 49%, 74% or 100%. Foreign capital, my experience tells me, is more worried about other aspects of doing business in India. So, we must be able to expedite clearances. That?s where we have to match Switzerland, Singapore and Hong Kong. We have to be a good place to do business and this can happen through reforms that improves governance. That is where we need the involvement of states as foreign capital will ultimately land in one or the other state. So, I feel that focus should be more on reforming the processes and procedures, rather than hoping to get foreign capital by raising investment caps.
What is your view on the fiscal deficit? Can the target (for reduction in the deficit to 4.6% of GDP) for the current fiscal be met?
There is no way that target can be met. The figures which have come has shown that in the four months we have already had a deficit that is 55% of the target for the full year. Fiscal deficit is a function of three things-one is revenue collection. Now if we have industrial slowdown then revenues will not be as buoyant as expected. Second, it is a function of expenditure. I see no great effort at expenditure control and the third is the size of the GDP. If the GDP growth declines from 8% to 7% then even fiscal deficit has to be adjusted with this lower base. This year, there is no way we can keep the deficit at the targeted level of 4.6%.
We have been talking about electoral reforms for so long but nothing has been done. What is your opinion on this?
There cannot be any control over corruption in our country without massive electoral reforms. The political class will have to put their heads together and ensure that we do whatever is needed to bring about electoral reforms. Reforms should encompass the functioning of political parties, registration of parties, their recognition, inner-party democracy and funding of parties. Then, you come to holding of elections, preparation of electoral rolls, expenditure during elections. As for funding of elections, one question is how much it should be state funding and how much, private. I think electoral reform is an idea whose time has come. I don?t think we can postpone it any longer.
What needs to be done to prevent flow of black money during elections?
The only way in which it can be curbed is vigilance as there are instances of cash for votes and now even the voters are asking for money. This is a practice which needs to be curbed and anyone who is found giving money for buying votes should be debarred for life from contesting elections.
Anna Hazare?s movement was a success. But after this movement, we see the enforcement directorate is after Ramdev. Kejriwal is being targeted by the income tax department. As former finance minister and senior member of the House, how do you see the whole thing?
I see the whole thing not only with regard to Baba Ramdev or Arvind Kejriwal. Even the manner in which the CBI is looking at the 2G scam or Delhi police has conducted itself with regard to cash-for-vote scam, you will find that the whistle blowers have become the accused. The is a big disincentive to those who fight corruption.