‘Exporters benefiting from sops should shift to non-cash modes’

Demonetisation drive won’t hit FDI inflows and Make In India initiative, says Nirmala Sitharaman

December 03, 2016 12:09 am | Updated 01:10 pm IST

Union Minister of State for Commerce Nirmala Sitharaman. File photo: R. Ravindran

Union Minister of State for Commerce Nirmala Sitharaman. File photo: R. Ravindran

Commerce & Industry Minister Nirmala Sitharaman has said the Election Commission of India (ECI) needs to look into the proposal for state funding of elections to combat the influence of cash and black money in polls. In an interview to The Hindu, the senior BJP leader said her party was open to discussions with the ECI and other parties on the issue. She said the demonetisation exercise would neither hit FDI inflows nor impact the Make In India initiative. Edited excerpts:

How prepared were you and your ministry to handle the impact of the demonetisation on India's trade and industry, and what are your top priorities to address the pain caused by the exercise at least in the short-term?

 

I was as prepared as anybody else. I think the short term issues have gradually got eased out. After the demonetisation announcement, I spoke to all the Export Promotion Councils (EPC) and took their inputs. All of them agreed to the idea of black money clampdown and the demonetisation of Rs 500 and Rs 1000 notes. Due to the currency crunch, labour intensive sectors felt at that point of time that the weekly ceiling on cash withdrawals needs to be relaxed because they are dealing with migrant labourers and workforce who did not have a bank account. However, subsequently I have not heard anything from them. In fact, we were surprised then that they were still talking about people who don't have a bank account two years after Jan Dhan Yojana (financial inclusion programme) was launched on a mission mode.   

 

Tea plantations were provided with the arrangement that the District Magistrates will accept deposit of money by the tea garden owners (towards workers' wages) in an existing bank account of the district administration, and then ensure its disbursal to workers by the tea garden owners. That was done first for Assam because their request came first. 

 

How are you planning to resolve the differences between the Centre and the West Bengal government over this arrangement, and stop the blame game for tea estate workers not getting their wages?

 

I am shocked to hear this. We had written to the West Bengal chief secretary (on the issue). If the same arrangement was working in Assam, Tamil Nadu and Kerala, then why was it not effective in West Bengal? When West Bengal asked for it, we extended it to the state, and they then issued an order based on it (the Centre's letter). If they (West Bengalgovernment) think that it (the arrangement) won't work, why would they issue such an order? 

Any other measures in the pipeline?

 

After that the situation has eased out, and we have not had any body come back to us.   

 

With the elections being an area where there is a major influence of black money, will the government and the BJP push the proposal for state funding of polls in the interest of transparency and to curb corruption?

 

That is a larger issue and it certainly has implications on cash transactions. The Election Commission of India (ECI) has a big role to play (in addressing this issue and the proposal for state funding of polls). They (ECI) have to come in, have this debate and look into its implications, have its nuances well laid out and see what contours they have to fix. If the political parties are called to discuss the issue, the BJP will definitely go. 

 

Do you think the government's promotion of a non-cash or less-cash economy can help casual labourers, hired without a legal contract, to show the payments made to them (towards wages) by employers through bank accounts as 'proof of employment', and demand that they be regularised and made eligible for statutory benefits?

 

Being with the commerce and industry ministry, I can not be talking about regularising somebody's employment as it is not my terrain. What I am saying is employers should have made sure that the workers had a bank account. If that has not happened, now I am telling all of them that they will indeed have to ensure opening of accounts to workers. However, there is no written order as I can not issue a written order directing them to do so. I can only carry forward the government of India's message to them that largely all of us will have to move from cash transactions to institutionalised transactions either through a cheque or bank account or any other mode of payment. To those people who benefit as members of the commerce ministry-supported Export Promotion Councils (EPC), including those in the labour-intensive sectors, I am suggesting that they will first have to ensure that accounts are opened for all workers, and then make sure the wages are deposited in those accounts. 

 

When the exporters were facing difficulties, the government had come to their rescue through many incentives to help them better promote their products and boost their exports. Now we expect them to shift to non-cash modes for their transactions. Within my ministry, every body will now shift to non-cash payments. We had a group from Niti Aayog come and explain to all the staff that several payment options exist. There is the USSD technology that many of them here may not want to know about because that is for mobile phones that are not smart, and because USSD technology-based phones are used in rural areas where smart phones may not work as internet connections are not available. But even the USSD mode was explained in detail so that if they (ministry staff) have relatives in the rural areas, they are able to help them. Unified Payment Interface, QR code (for payments through mobile phone) and all such modes of alternative payments were explained. Kendriya Bhandars and government canteens here have been provided with POS (Point of Sale) machines to accept non-cash payments. It has been communicated that at least from January 1, 2017, the (commerce & industry) ministry and the commerce ministry-supported EPCs will ensure that they or their members cannot afford to pay cash for their transactions. But there is no written order.

 

The Centre always has been referring to the large market in India to attract Foreign Direct Investment (FDI). But with the domestic economy set to take a hit due to the demonetisation exercise, do you think the negative perception will impact FDI inflows and the Make In India initiative?

 

Why will it be hit? If anything, we are giving them an economy where only institutionalised transactions that are traceable, are going to happen. We are providing them an economy that does not entertain parallel running of unaccounted wealth. It is going to be clear that every operation will now have to increasingly be non-cash. We are moving to a less-cash economy. People should now believe that India is really being open and transparent about its dealings and measures. It cannot discourage. It can only encourage people to know that we are making it possible for them to operate in a cleaner manner. 

 

The difficulties faced by people now are about insufficient numbers of smaller denomination notes, such as Rs 50 and Rs 100, reaching the bank. Also, there are difficulties in getting change in currency notes of smaller denominations when you pay with the Rs 2000 note. As a result, people may be spending less. If more currency gets released into the economy, it is going to ease the cash transaction difficulties. But in the meanwhile, we are encouraging people to shift to non-cash modes of payment. No transactions of buying and selling are being prohibited. It is just that the behavioural attitude of buyers and sellers of goods and services should change from cash to non-cash. 

 

Is the government considering any stimulus package to help the economy recover from the demonetisation shock, to revive demand?

 

No. Industry might have raised demands including reducing corporate tax rates during their meeting with the finance ministry. But all banks have been told to ensure that the currency crunch eases. The RBI has to move the currency to the currency chest in each district. Once it reaches the district, each bank may get their allocation depending on their presence there. 

 

Mr Wilbur Ross, chosen by the US President-elect Donald Trump for the commerce secretary's position, was recently quoted as saying that he is going to fix the 'dumb trade' that the US has been doing by "getting rid of some of the tariff and non-tariff barriers to American exports." The US had concerns on India's 'tariff and non-tariff barriers', especially in the Information & Communications Technology sector that it termed as 'barriers to digital trade'. With the Indian government keen on building a digital economy, how will you address these concerns?   

 

As much we have engaged with the Obama administration, we shall also engage with the Trump administration. After he (Donald Trump) takes charge (as the US President) on January 20, 2017, there will be a formal attempt from our side to brief his team on India's concerns including those relating to the pharma and IT sectors, US visa fee and the absence of a bilateral totalisation (social security) pact for which talks have been going on for a very long time. Given the size of the Indian economy, its huge and growing middle class, the strategic position of India, and being the only economy and democracy in which the growth is sustained at over 7 per cent, I can't see any administration ignoring our concerns.

 

Is the government considering any measures to prevent hoarding of gold?

 

There are already a few measures on gold monetisation. All of them will have to come of use now. 

 

What sort of reforms are you aiming at in the area of government procurement?

 

We have already placed a lot of tenders through the Government Electronic Marketplace (GEM), wherein departments that need to buy goods can see in the GEM the available sellers and the prices at which they are offering the goods. The payment can also be made online. So there is no need for cash payment at all. Therefore, the GEM will come in handy for ministries that want to use it. That is a major step forward in having less cash transactions.

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