I don't want my statement to be sounding any bit with overconfidence.
Trade negotiations between India and the US are going well and will conclude sooner than expected, Finance Minister Nirmala Sitharaman has said. Last month, India and the US failed to announce a limited trade deal in New York during the meeting of Prime Minister Narendra Modi and President Donald Trump, due to still prevailing differences over the package including access Washington has sought to Indian markets for medical devices, such as stents and knee implants, information and communications technology (ICT) products and dairy products with the removal of price caps. India is keen on a fair and reasonable trade deal in which its request for market access is secured while also addressing the trade deficit issue raised by the US. “I think the trade talks would conclude sooner. The talks are going on very well.
Yes, we couldn’t conclude it before the Prime Minister’s (Narendra Modi’s) visit (to the US) happened. But both sides are engaged with all commitment,” Sitharaman said here on Tuesday. Sitharaman gave a lecture on ‘Indian Economy: Challenges and Prospects’, which was organised by the Deepak and Neera Raj Center on Indian Economic Policies at Columbia University’s School of International and Public Affairs. During a question and answer session that followed, Sitharaman was asked about the trade talks between New Delhi and Washington.
Trade tensions between India and the US have been rising with President Donald Trump, championing his ‘America First’ policy, complaining that tariffs imposed by New Delhi on American products were “no longer acceptable” to his country. Minister of Commerce Piyush Goyal and US Trade Representative Robert Lighthizer are continuing their efforts to resolve some of our differences. Sitharaman was also asked about Nobel Laureate Abhijit Banerjee’s comments that the Indian economy “is doing very badly” and when the economy is going into a “tailspin” is the time when one should not worry about monetary stability but about demand.
She responded that the government is focused on boosting consumption. She said steps have been taken to push liquidity through Non Banking Financial Companies and through the banks to reach the ground level. In the budget presented in July, Sitharaman had announced Rs 100 lakh crore for the next five years for building public infrastructure.
The minister said stronger infrastructure would boost consumption. She said the government had formed a task force which will help front-load a large part of this money for infrastructure. “I’m not waiting to even spread it over five years. I’m willing to front load it, even as the projects come through,” she said. Director at the Raj Center and former NITI Aayog Vice Chairman Arvind Panagariya said recent tax cuts announced by the government would go in the same direction of boosting demand. “(It) leaves a lot more in the hands of the corporates to invest, so investment is also demand.
When we say demand we think only of consumption as demand but investment is also demand,” Panagariya said. Asked about the problem of joblessness in India and severe credit crunch, Sitharaman said at no point has she conveyed that enough had been done to tackle the issues and that now the economy has to revive. “I shall keep doing, I shall keep responding… to the global developments as much as domestic developments.
I shall keep responding to the macro as much as sectoral (needs). So, it’s a completely dynamic approach that this government has taken towards handling the economy. “And therefore as a result I would think if that tempo is maintained, we should be able to reach the target we’ve set for ourselves. I don’t want my statement to be sounding any bit with overconfidence. Not at all. But I won’t be underestimating the ability of the Prime Minister and the entire team, which is known for hard work, hard, meaningful work, delivering targets, delivering promises.
So I’m sure we’ll be able to move forward in that direction,” the minister said. When asked whether appropriation of the RBI’s reserves and disinvestment proceeds to fund the government’s discretionary spending made economic sense, Sitharaman said, “I don’t mind answering the question in a very official kind of way but I somehow don’t appreciate the tone (in which she was questioned).”
Sitharaman said there is a committee, consisting of domain experts, which looks into what is the available surplus with the RBI. “They decide what is realisable surplus, and what is notional surplus. And with all that taken on board, a formula is fixed on what is a reasonable amount of that realisable surplus. “So I don’t think it was capital money being spent… not at all. It is not as if it is something that has happened just now.
Periodically, governments do take money from the Reserve Bank based on a formula. The formulation arrived is matching with some of the global best practices,” she said. On demonetisation, Sitharaman said there was every reason for it to have been implemented. “Demonetisation was one of the very important steps taken in order to contain black money, together with the fact that many of the transactions of the Indian economy were not under any institutional radar. “So the best thing about demonetisation was that with one stroke we fulfilled one of our promises (to fight corruption and contain black money) and also simultaneously brought India to the digital sphere,” the minister said.