I See Myself As The Minister For Investments. It Is My Job To Get People, Private & Public ,To Invest

Updated: May 31 2004, 05:30am hrs
These days if you dont know who to believe on the economy, well my guest today is somebody whose every word you can hang onto, because the buck stops on his desk - P Chidambaram, PC to friends, the new finance minister.

Hi. Morning. Should be a nice feeling to be back in your old office Even though its the first week and lots of work to do.
Yeah, its been a very busy first week. But one likes to do things one is familiar with, rather than get into unfamiliar territory. Im conscious that the buck stops here. But the buck starts in many other buildings, many other ministries. And in a coalition government, I think its important for everyone to pull together and move in the same direction. I think it will gel, it will fall in place and I think in about two-three weeks and after the first short session of Parliament, I expect that things will get moving.

WALK THE TALK
" We have to find a way in which the manufacturing sector gets into what I call desegregated production. Move some plants to rural areas or to small towns and open some jobs for these people "
But you know, when we say, the buck stops here, its a huge buck. Its also very different from what it was the last time you were here, because then Narayan Murthy, Premji and BPO were not household words. Nor were Sitaram Yechury and AB Bardhan. So things have changed a great deal.
Well, yes and no. Many of the colleagues we are working with, both in government and outside, are familiar faces. We have worked with them between 96 and 98. Some of them were ministers in the UF govt. Many were ministers in the Congress govt. So none of them is actually a stranger to me or to the govt. The second thing that has happened is, the economy is much more robust. Thanks to the first years of reform, then what we built in two years of UF govt and even the BJP govt. While I have my differences with them, you have to concede that inflation is quite stable, the economy is in a growth mode and reserves are extremely comfortable. If you want a contrast, you must go back to 91, not 96.

Right, right. 91 is when things were...
91 was a picture of gloom. I still remember the day when the Governor, Reserve Bank walked in with his Deputy Governor, very...

Morose...
...Stealthily pulled out a little chit of paper from his pocket and whispered that reserves were something like, what, $1.1 billion and it was a frightening prospect. Today, we can afford to take a few risks. We can afford to stretch a point and see, lets see what happens here. $118 billion of reserves, stable inflation, currency is stable, I think it gives me much more room to experiment with ideas.

Today, today in fact, you have a very enviable position, when at least 20 Indian companies could go out in the markets and raise a billion dollars...
Yes.

If they wish to.
Yes. And that is, weve never tried a sovereign bond. And in the absence of that, you find Indian companies able to raise money, close to a rate at which the sovereign can raise money.

Right.
So that means that Indian companies have acquired muscle.

Right.
All this has happened over the last 13 years. We must be proud of that.

Right. Well, you said just now they give you the luxury of being more creative, more enterprising, experimenting with new ideas. Give us a sense of some. Whats been brewing in your mind these years out of power I know politicians can think much more when theyre out of power, because once you come in, you have files and Parliament and business and...
I have never been bogged down by files.

And media.
I think files...Media is friendly, thank God. You see, we have to factor in the 13 years of experience.

Right.
Reforms started in 1991. Dr Manmohan Singh, Prime Minister, has been out of office now for 8 years. This is deeply reflected in the economy. I have been out of office now for 6 years. I have travelled in Tamil Nadu alone thrice - length and breadth of Tamil Nadu. I have travelled in India, travelled abroad, Ive visited universities. You have to factor in this experience. If we dont factor in this experience, I think were betraying the mandate. Once you factor in the experience, its pretty clear to me that reforms come to the poor man, like Gandhiji said, God comes to the poor man in the form of food on a plate.

Right.
Reforms come to the poor man in the manner of drinking water, a road connecting his village, basic education, basic healthcare. These are the...

Toilets,...
Yeah, sanitation, sanitation. Now that is one section which is watching with apprehension, what are these guys doing Theyre saying theyre reforming. They say theyre reforming, were not against reforms, but what does it mean to me These can be addressed in a time-frame. All it requires is better use of money, better governance. Now, I can ensure tighter monitoring of the use of money, but governance has to improve at the state level.

State level...
And at the panchayat level. Thats one aspect of which Im extremely conscious and you will find that we address that. The other is the larger macro-economic issues that have to be addressed. If you look at that, top of the list is agriculture. See, when a farmer commits suicide, he is taking an extreme step. Thats extreme distress. We have to address that. Its not one farmer, two farmers, or two thousand farmers. Even if one farmer commits suicide, hes in extreme distress and one has to reckon with that. The second in the macro-picture is jobs. I go to villages, I find 20, 25 young men standing there. Theyre not highly educated. Theyve got a basic education, but not highly educated. Now I cant find them a job in Infosys or Wipro. They dont want to work on farms, because theres really no work on farms as such.

Exactly, and in fact, when they were illiterate it was easy, because they could just hang around..
Yes, quite right, now aspirations have risen. Now I have to find them a job not in agriculture, not in services, which means I have to find them a job in manufacturing sector. So we have to find a way in which the manufacturing sector gets into what I call desegregated production. Move some plants to rural areas or to small towns and open some jobs for these people.

Reforms come to the poor man in the manner of drinking water, a road connecting his village, basic education, basic healthcare
How do you do that
You see...

Short of govt setting up this entire thing and then losing money
No, no, no, no. Take, take one single, very simple fiscal measure. Today we levy excise duty unit-wise.

Right.
Which means there is a great disincentive for someone to manufacture some components in one unit, move it to another unit under the same company, because hell have to go through a very tortuous procedure. Suppose, Im just thinking aloud, suppose you shift excise to company-wise. Allow people to go into desegregated production. Take, for example, soap. Why should soap be produced in one huge factory With the technology today, quality soap can be produced in twenty different units. That is the only way in which jobs will be created in the manufacturing sector. And we have to also find entrepreneurs who are willing to set up small factories, small units in rural areas. Employing 50 people, 100 people, what you call SMEs. But SMEs...

Small medium enterprises...
SMEs tend to gravitate to the towns, which is understandable. But if you can give us reasonable social infrastructure, say in a village, which is 10 miles from a town.

Those things take time. But you know, the larger question, the first, basic question, have reforms worked or not worked Now, weve had in our paper Amartya Sen saying dont confuse dogma with economics. Jagdish Bhagwati saying first acknowledge that the 91 reforms have reduced poverty. And yet, yet you have many allies, the Left, in fact many in the Congress, who now want to give reforms a bad name. So do you have a fundamental difference with
None at all. You see, the Left wants, and I want, a greater emphasis on agriculture, so that the occupation on which 70% of Indias working population is dependent gets a boost. And we will do that. The Left wants jobs to be created in the manufacturing sector for a variety of reasons, many of them economic, I dont have to spell them out. We need to give a boost to the manufacturing sector. Yeah. We cant entirely depend on services alone. The jobs will come in the manufacturing sector.

But theres no harking back to protectionist days...
No, no, no...

We want to decentralise, deregulate so that people can get out, create markets, create products, & produce goods for them.
Socialist days, increased tax rates...
No, no...

...make the poor feel good by robbing the rich.
No. We want to decentralise, deregulate so that people with entrepreneurial skills can get out, create markets, create products, create demand and produce goods for them. That can be done. That hunger is there among young men. I was told about a case of someone who works with McKinsey for several years, who said well, yes, he says I want to give up and set up my own plant. Or own business. That kind of hunger is there among young men. I find it in IIM graduates, I find it in IIT graduates. What we need to give them is the physical and financial infrastructural support.

If you look at your own agenda, this will take many years, you know the policy changes and things, but if you look at your own agenda, what are the five or seven things you need to do first Budget apart.
Well, I cant talk about the budget.

Right.
...because I havent given much thought to it yet.

Right.
The first signal that will go is that...this is the pre-agricultural season. Were just on the threshold, sowing, ploughing will start after the monsoon. The first signal that will go is that we give a big boost to agricultural credit. That a farmer must be encouraged to sow, to plough...

That doesnt have to wait for the budget.
No, no that has nothing to do with the budget. The first signal that will go is, here is a govt which is a friend of the farmer, we will give you the credit.

Subsidised
No, no, no. Get out of the moneylenders clutches.

Right.
We will give you credit on time. Please go sow, if you have to sow, plough if youve to plough, buy seeds if youve to buy seeds, invest in a well, invest in a pump, get on with the job.

So, sort of kickstarting the credit business
Yes.

What else Whats next
The second signal that I want to send is that I see myself as the minister of investment. I think weve had so much...

Thats a new one.
Occupation with the minister for disinvestment. I am the minister of investments. I want to....

Also for a long time, the minister of finance was the minister for taxes.
No, I see myself as the minister for investments. Its my job to get people to invest. My experience, whatever goodwill I have, must be to invite capital, foreign, Indian, private, public, make them invest. Now, I am going to do that job. I am going to take upon it as my personal responsibility to get people to invest. And I will talk to public sector.

But you know outsiders.
I will talk to private sector.

Outsiders, foreigners, they feel insecure because they see...They want consistency. What they dont want is a political change here where people say Im going to reverse this, these mistakes have been made, they will be rectified and usually the mistakes. I mean if somebody thinks the pospects are I may have to pull back the money I invested.
If anyone in the world is looking at this programme, let me tell them very clearly. What more continuity can a country like India demonstrate to the whole world than bringing Dr Manmohan Singh as prime minister and me as finance minister. This is the biggest affirmation of continuity.

Well, I think the other thing they do is, weve done is bring the Left to our TV screens. I dont know, Ive written critically of the fund managers who get spooked the moment they see AB Bardhans face, because you know the Left is part of our politics. But there is a certain insecurity which has now crept in. Can there be a rollback on any of the fundamental areas of reform
No one wants a rollback. Ive spoken to the Left, no one wants a rollback. What they want is you go forward, but take sections of the people who have been neglected or ignored along with you.

But their method is to subsidise then, or cross-subsidies...
I think thats a very simplistic way of putting it. What they say is dont put too high a burden on those who cant bear the burden. The burden that you put on peoples shoulder must be proportionate to their ablility to bear it. Now I think thats a very valid statement. If someone cant bear a burden, whats the point of putting that burden on his shoulders So well have to introduce the doctrine of proportionality while we impose burdens.

So, what consistency do we see We see consistency in our FDI policies, we see consistency in our tax rates and we see consistency...Where do we see continuity and where do we see change
You see continuity in the basic premise that an open, competitive, deregulated economy where market forces have by and large free play will bring prosperity. At the same time, all over the world, all markets are well-regulated. Control is one thing, regulation is another. So that is a consistent thread that has been running through Indias economic reforms for the last 13 years, give a blip here or blip there. That is the consistency. The change is that you have to factor in the 20-25 per cent of the people who seem to be completely left out of the reform process. So we have to address their concerns at the same time. That is the change.

Without necessarily throwing doles at them.
We dont have to throw doles at all. Whos asking for doles They dont want doles.

Thats the problem with poverty, anti-poverty programmes in India. I believe they consist in pauperising the poor and then giving doles or alms to them.
They dont want the doles. They dont want doles. What does he want He wants drinking water. Now, I will find the way in which drinking water is taken up as a mission. Water is required for drinking, for irrigation and for industry. Well have to use our water resources. This has to be a mission. Well have to go into a mission-mode. Well have to give them drinking water. 57 years after independence, you cant tell them we dont have.

And you will find the money for it
We will find the money. Money is there. Its the misuse of money. It is the wrong use of money which is hurting us.

Youve talked about, one, controlling the flow of money and second, looking at the way its spent. How do you control it when your own chief ministers are throwing free power Its a virus. Because one has done it, seconds done it, what is to stop 20 others from doing it How do you handle it
You see...

This is bribing the voter...
Well, perhaps the Andhra Pradesh decision was a reaction to an extreme situation. But in course of time, the govt will find that under the law of Parliament he has to provide an explicit subsidy. And that will have to be reflected in the Budget. And when it gets reflected in the Budget, somewhere he has to make a cut. And then the democratic process will take over...