‘PM asked me to keep the growth momentum going’ | The Financial Express

‘PM asked me to keep the growth momentum going’

“One thing from Day 1 of preparation for this budget has been very clear in my head and, thankfully, the Prime Minister was also on board with it.”

Budget 2023, FM
A day after the Budget, Finance Minister Nirmala Sitharaman spoke exclusively on a host of issues, including why the government can’t wait and watch on capital expenditure.

A day after the Budget, Finance Minister Nirmala Sitharaman spoke exclusively on a host of issues, including why the government can’t wait and watch on capital expenditure. Excerpts:

The overall response to the Budget has been positive. What is the one main thing you had in mind when you began work on the Budget?

Nirmala Sitharaman: One thing from Day 1 of preparation for this budget has been very clear in my head and, thankfully, the Prime Minister was also on board with it. He said growth ka momentum rakhna chahiye (we need to keep the growth momentum). If anything, we need to speed it up, oil it better and run it better, and that is why this number of Rs 10 lakh crore for capital expenditure came up.

The government has been consistent with this capex push over the last three years. Has the private sector not stepped up enough despite a slew of incentives? 

FM: One of the main incentives, if I can use that word, given for the corporate sector was in 2019, prior to the pandemic. The pandemic was not just one year because you had Omicron wave, Delta wave, there was no let-up. We weren’t really looking if they were investing or not. We went about investing. Simultaneously, of course, the private sector has come out, the twin balance sheet problem has been addressed, they have deleveraged themselves considerably. Their books of accounts are far more cleaner, neater now. Also with the PLI, China plus one, Europe plus one, etc, the private sector is now seeing the virtue of moving fast on this track. 

Since data comes in with a lag, how much expansion has happened, how much of newer investments have happened, it’s going to take a while for us to compute. In the meantime, we cannot sit back and watch. So I’m not even getting into that terrain where you’re saying that it (private sector investment) may not happen this year also and, therefore, would you want to go on with the government expenditure…I’m single-mindedly going on this ground that this is a golden opportunity for India. We should really not miss the bus this time and, therefore, (we have to ensure that) government expenditure continues in infrastructure building, capital investments, and so on.

When private sector CEOs or industrialists meet you, what do they say? What’s holding them back? Are there any specific concerns, are they saying they are waiting for the right time? What is the message? 

I am not sure there is a single message. All of them are moving but moving in their own domains…To be fair to them, I think it’s (their) transition not just to invest more, it’s also a transition to invest like how more? Is it going to be with more technology, is it going to be with industry 4.0, how much of investment is going to come in through robotics or AI? So even they are moving into areas which are not so familiar for them. 

So investment is not waiting for better market conditions, but investment is also waiting: should I put all of IoT (Internet of Things) in my company?…That transition happening now is happening for the next 100 years, for instance. They are making sure they are putting (in) some things…which is going to take them that far. It is unlike any previous decades when companies invested to expand. It is also investing in transition, so naturally it takes time.

That is why…one of the things they say is that we need manpower. We need manpower, also because you talk of jobs and all. What kind of manpower? The kind of manpower which can get into that technology enhancement which is happening in my office. But for that I can’t employ him and then train him because I’m already looking at various different aspects of transitioning into high technology. If there are people who have got appropriate skills, I’m willing to pay them any amount, but I can’t settle for somebody who doesn’t have that technology or skill sets and then bring him here, train him, also invest in his training and then also the transition. So that the demand exists for appropriate high-level skills, which is going to help them in the transition into greater technology…that is why you find that in the budget, we have placed a lot of Industry 4.0-related training and skilling.

Is this huge increase in capex within the overall revenue increase of 7.5 per cent? 


Does this suggest welfare spending takes a hit?

Not at all. Otherwise, why would I give Rs 79,000 crore to PM-Awas Yojana? Why would I ensure that Jal Jeevan Mission also has a greater outlay… that is one thing which I like to highlight because when we give to Jal Jeevan Mission, we give it as a grant, but when it goes to a state that goes as a capital expenditure for the states where they set up waterworks, tanks and give pipeline connections….That is why in the budget, there is also this reference to effective capital expenditure. 

The allocation for MNREGA has come down. What’s the signal from that?

If I am giving Awas Yojana, who are the people who are going to do the Awas Yojana, it’s the same rural employed, those who are coming to demand (jobs) in the MNREGA. So if I’m giving a provision, where Awas is getting the money, but the labour comes from this set of people who go for the MNREGA job card, it means I’m still giving a job and also after that giving MNREGA. 

MNREGA is when (there is a lull in) agricultural activities…everything is over, till the next crop they have no jobs, that’s when MNREGA comes into play. Assume that agricultural activities are fully on, they are not going to be able to spare time for anything else. But after that, at least, Awas is giving them a job…I am ensuring jobs through the rural employed in that scheme. It just means the same. 

Last year, the three Fs — food, fertiliser, fuel — disrupted the fiscal math. For next year’s estimates, we see a considerable reduction in subsidies. How do you see that segment playing out given the global risks? Also, on the reliance on Russian oil, does that continue going ahead? 

The three Fs that you were talking about, which we referred to last time also, the pressure on some might be easing now, but they are all totally extraneous. I will have to be prepared for any volatility there. There is just no doubt. 

But, like we explained, we don’t fix a number and say I have to be prepared for that number…The demand here to a large extent is inelastic. I will have to get it every time…I will wait to see how it is developing and keep a constant eye on it to see how I can get better value for my money, but these are essentials. First of all, with Russia, it’s not a dependence, it’s a choice. And a choice that we have made keeping India’s interest above everything else. If I’m getting it at a favourable rate, I will get it for the sake of people as long as that is favourable. Using your word, the dependence will continue. It’s not dependence, however.

A large segment of inflation last year was attributed to it being imported but like the Survey has pointed out, now there is entrenched inflation. There is also a higher inflation rate for services, rather than the goods side which is easing now. 

To be fair, the Indian economy’s issues with inflation are cyclical. They are influenced by crop patterns, by the monsoon…(if you don’t have a good monsoon) you’re going to have a disruption in the supply of grains or cereals or pulses and that will obviously influence the supply… influence the inflation figure. 

What (plays out) in a very big, impactful way, different from the usual years, is that we’ve been hit in all the three cases (food, fuel, fertiliser) simultaneously at the same time, particularly when coming out of Covid. That’s where it was a big challenge and we are now using this as a new normal.

Your point about the cut in MNREGA is well taken, that it comes when rural water and housing schemes have seen a higher allocation. But is there also a subtext of a nudge for people who are in rural areas, workers who have not gone back, for them to move back to the industrial hubs because that’s probably important for the MSMEs to kickstart once again? On the personal income tax side, there is a nudge to move to the newer tax regime, which looks clutter free and is probably more progressive, but is there also a nudge towards consumption rather than saving?

You are reading too much into this. No nudge at all. We are not nudging anybody to do anything. You want to be at your home, in the village, where there is no job but jobs through MNREGA, so be it. We are not doing any nudging there because the nudging that I would love to believe that I am doing is to tell them to get skilled. Be where you want by your choice, but you want skill, I’ll provide the training. That’s the nudge I would like to give, not beyond it. 

The nudge theory you’re also extending to the personal tax regime. Yes, we want a nudge to be done, for people to move to a simpler (regime), make that newer regime a bit more attractive, yes, a nudge that far, but not as much as you want to interpret for any other reason. Nudge not for promotion, immediately saying consumption, we don’t want you to invest or save. No, not at all. Otherwise, I wouldn’t come up with a budget patra saving. Otherwise, I wouldn’t bring in differential treatment for senior citizens’ monthly income schemes. 

What does the new regime being the default mean?

By default, it means that when you file the returns, in the earlier regime, you could fill up your form and, say, you are in this scheme or that. Now when you open the screen (to file the tax), it will just give you the new regime’s form, into which you fill the details. But while doing so, you can say no, not new, I want to be in the old regime.

With these changes, how many people do you expect to shift to the new tax regime?

About 50 to 55% of people… we expect will shift to the new tax regime… And even for those utilising the maximum available exemption points (in the old regime), the new regime without the exemptions would be attractive. 

Life insurance is sold in India, mostly as a savings instrument. So when one moves to the new tax regime with new exemptions, it doesn’t incentivise anybody to put money in life insurance providers, meaning insurance companies have to rethink how they will sell. But does it disincentivize insurance?

It’s all right for a time when we wanted to incentivize people to look at insurance as an option for saving…But I also want to believe that the taxpayer knows where he needs to put this money. I constantly don’t need to guide them. And even worse, I don’t need to incentivize them… So I don’t think these are days when you have to tell them (consumers) to please take care of their life, you need to cover for your family, you need to protect yourself. We are, therefore, underestimating our salaried class and the middle class. The moment (he gets) a better rate and he has to pay less in tax, he knows how he wants to prioritise.

You’re part of the CCS (Cabinet Committee on Security), how do you look at the conflict in Europe… because it’s a tightrope walk India is walking and, of course, there are pros and cons.

Well, there is no doubt it’s (the Ukraine war) led to a lot of uncertainties. No doubt, it has led to a lot of disruptions in, otherwise, what is a very predictable course of trade… the earlier triple F reference (food, fuel, fertiliser), the cost has gone up for all these things. So war, as is always understood to, even in this instance, has led to a lot of human suffering. So if I don’t sound too idealistic, I strongly believe, there should be attempts to bring peace. There should be an attempt to bring negotiation as a path towards achieving peace. It is important to negotiate, bring dialogue, and bring diplomacy to do their full job. The attempt now should be to bring (the war) to an end. And how do you do that? By not having more war, I would rather have more diplomacy.

But this China-Russia axis and India taking a position in its own national interest, does it put you in a dilemma on some other aspects?

To be fair, India, I think, has never had the advantage of just looking at its interests, forgetting its neighbourhood. India has never had the opportunity. It has never had the luck. 

The oft-quoted Vajpayee remark that I can’t choose my neighbours, I can choose my friends, is so true. And if you can’t choose, you also have to understand how you are going to be able to have your citizens do their daily jobs, lead their lives and lead them towards prosperity. This has been a challenge for India since 1947. I don’t think that situation has changed, but surely, because you are (now) able to convey a lot more to friends who are far off or friends who are near and also in institutions, global institutions, India’s voice probably is getting heard better, India’s position is also getting appreciated better.

Disinvestment target for the next year is the same as for the current year. Some announcements made in the last Budget, including privatisation of two banks, have not happened. Has this got to do with markets? 

It requires a lot of paperwork. We need all the time to come to the market. 

Some global agencies have projected a lower growth estimate for India in the coming year. Nomura 5.1 per cent, and IMF 6.1 per cent. Is your projection of 6.5 per cent growth for 2023-24 an over-estimation?
I don’t think so. Globally, everybody’s challenges are increasing and, therefore, there will be a dip in 2023-24. And then again, there’s a sharp rise; even then (it) will be going up compared to anybody else of our size. So this dip is also because of the global uncertainty, which is not relenting at all. The uncertainty is becoming almost systemic. People, however much they are trying, are not able to extricate their economies from it. That’s why this difference. Especially with this budget, I think it’s going to be completely the global uncertainty rather than what is happening within the country. And for that, like I said, we need to be prepared.  

On the issue of land acquisition, it started in the beginning of 2014, then hit a pause; then the farm laws; labour, there is a sense that it’s got stuck. So on some of these very fundamental reforms, are you a little disappointed that you have not pushed the envelope?

I don’t think so. The government’s intent was very clear. It put its time and investment into it in terms of the way in which consultations happened; it was formulated, went through committees and then went through the process of legislation. The government’s commitment and its intent on reforms is intact. But the fact remains that many of those, who supported it earlier, reneged…When you make noise on the streets, but you’re not able to argue in Parliament, and you create obstruction with an absolutely well-knit disinformation campaign…Governance is also about working together with people however much anybody would campaign against us. I’m very clear on all the three, that the positions of people (who opposed) have been hypocritical and undermined elected representatives’ decision-making in Parliament.

So this political heavy lifting, do you think there will be space for it in the coming years if your party comes back to power?

I strongly believe we will come. There’s just no case against this government, however, much the opposition screams about Bharat jodo Bharat todo, whatever be the name of the campaigns. If there is a strong argument against this government, I’m yet to hear a voice. I’m not undermining the opposition. Let them please come out. But I’ve not heard a substantial argument to say, no, this government can’t continue, except that we don’t like Prime Minister Modi’s face. You can’t continue with negative politics. Tell us what is it, tell us where we are going. And then appeal to the people saying that’s not happening, it’s going wrong, and therefore I’m the solution for it. That’s not there. So I would love the opposition to do the opposition’s job and then claim whatever they want. At the moment, they are running away.

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First published on: 03-02-2023 at 05:00 IST