The controversy over the Adani Group and subsequent pullout of its Rs 20,000-crore FPO has not dented India’s reputation and macro-economic fundamentals, finance minister Nirmala Sitharaman said on Saturday.
“I do not think the Adani issue has impacted India’s reputation. Otherwise, how would have our foreign exchange reserves gone up by $8 billion in the past few days alone. This shows that the perception on India and its inherent strengths is intact,” she said in a post-Budget event in Mumbai.
“The RBI has made a statement. Prior to that, banks and the Life Insurance Corporation of India have disclosed their exposure (to the Adani Group). Regulators are independent of the government and they are left to themselves to do what is appropriate, so the market is well regulated,” she added.
When asked about the FY23 Budget’s decision to privatise two state-run lenders, Sitharaman said there was no update that she could share.
The Budget proposals for the next financial year aim to achieve the twin objectives of spurring economic growth and fiscal consolidation, the finance minister said. “Growth is the main focus. We want to sustain that recovery, sustain that growth,” she said.
Finance secretary TV Somanathan said the combination of buoyant revenues, strict control over avoidable expenditure and the rapidly growing GDP would help the government achieve the medium-term fiscal deficit target of 4.5% of GDP by FY26. “The commitment to reach below 4.5% has been reiterated and the strategy to reach it will involve a combination of these three things,” Somanathan said.
The government aims to reduce fiscal deficit to 5.9% in FY24 from an estimated 6.4% in FY23.
Speaking at the event, chief economic advisor V Anantha Nageswaran said: “If there is a steady nominal GDP growth of 10%, which is not a very high number every year, that would bring about a meaningful reduction in the fiscal deficit and debt parameters.”
Sitharaman said the Budget has made a record provision of Rs 10 trillion for capex in FY24 (compared with Rs 7.28 trillion in FY23) as Prime Minister Narendra Modi desired to continue with the elevated public capital expenditure to boost growth. “Mumbai should be liking it (the proposals),” she said.
Regarding the Budget announcement that it would remove tax exemption on life insurance products where the aggregate premium is above Rs 5 lakh, the FM said in response to a question on the rationale behind it: “In this specific case, tax is levied on annual premium which is over a specific number. The idea of penetration and the potential that exists in India for insurance is that a majority of the population is still not completely covered. The penetration cannot happen on the back of one person paying an annual premium of Rs 5 lakh per annum.”
The finance ministry officials present at the meet also made it clear that the tweaks on taxation on the insurance front will not impact the policy agenda of deepening penetration and clarified that there was sufficient data to suggest that investments were masquerading as insurance premiums, due to which a decision was taken to tax the same.
On the decision to convert outstanding dues into equity at Vodafone Idea, finance secretary Somanathan said the transaction is being done as a package for all telcos. He said the government share will be held by the Department of Investment and Public Asset Management (DIPAM), where the stake will be considered as a public shareholder.
“We are not bearing Vodafone Idea’s debts. The company is not in a position of giving its dues to the government. That is why we are taking the company’s shares. This means that we are shareholders in the company. When the company will gain profit, we will get the profit,” the finance minister said, responding to a question on whether the government’s relief to Vodafone Idea will set a precedent for the future.
DIPAM secretary Tuhin Kanta Pandey said the price has been taken at Rs 10 despite the Vodafone Idea shares trading lower on bourses because, as per laws, preferential allotments have to happen at the face value of a share.
Sitharaman said there is no timeline which has been decided to end the old tax regime, and the government has only introduced a simpler new tax regime, which has the incentives of lower rates.
The officials also denied that this will impact the savings in the economy. Nageswaran said citizens are being given an expanded array of choices to determine what they want to do with their money.
Answering a question on introducing the controversial P-notes for GIFT City, Somanathan said it competes with other international financial services centres, due to which such provision has to be made and added that India always retains the right to mitigate any perceived risks.
Somanathan said the Rs 35,000-crore outlay for green initiatives will be primarily used for retrofitting in petroleum refineries and augmenting strategic storage capacity. “Some of the public sector refineries and other infrastructure facilities in the petroleum sector need retrofitting to meet our ambitious emissions and pollution targets,” he said.