‘From depressing scenario we are certainly in a recovery mode’

Updated - December 04, 2021 11:35 pm IST

Published - April 19, 2015 12:01 am IST - Washington

Union Finance Minister Arun Jaitley spoke to The Hindu ’s Puja Mehra in Washington on the state of the economy, on his plans for economic reforms, including the politically thorny issue of land acquisition amendments, the vexatious saffron bullying by some of the Central Ministers and Modinomics. Excerpts from the interview:

While the Modi government has brought a lot of much-needed energy to the economy, the signs of recovery are not without some of the indicators being in rather worrisome shape – exports contracting hugely, the Reserve Bank’s warning on April 7 that the Central Statistics Office is likely to going to have to revise downwards growth figures for 2014-15 ... How worried are you and the Prime Minister about these dampeners?

These indicators all show that we are in a recovery mode. Everything has become perfect has never been the case. From what appeared to be a depressing scenario, we are certainly in a recovery mode. At times patchy signals do emerge. Some signals like exports are also because of the weak global demand and they are attributable to global factors. But overall, nobody can deny that in the midst of the global slowdown, situation in India is one of the bright spots and if we can touch a reasonable level of growth without the full impact of the steps which we have taken, because the impact will be felt a little later, I have reason for optimism that in the days to come the growth figures are only going to improve.

Industry leaders like Deepak Parekh and Kiran Mazumdar-Shaw have said that the energy and intent at the top is not at all showing on the ground …

I don’t want to comment on individual statements. The world has a different view about India than a few domestic cynics.

India at this point has opportunity to leapfrog economically, but every now and then, front-page news is dominated by reports — many of which are genuine — of let us call it saffron bullying. How are your government and party ensuring that bullying by the saffron brigade won’t hijack Prime Minister Modi’s economic agenda?

Government’s agenda is developmental. You have pointed out a few distractions. A few of the distractions are on account of irresponsible statements of some individuals. They have been advised. They have been seriously cautioned at the highest level in the party and the government. At the same time, part of this campaign is also on account of misreporting and falsehood. India globally got a bad name for the alleged attack on churches. Now that the facts have been investigated in each case, in most of them, it turned to be pure law and order issues at the domestic level without any political or religious overtones. There were cases of theft, of irresponsible behaviour … the nun in Kolkata was raped by somebody from Bangladesh and so on. The Mumbai incident, two Delhi incidents … they have all been cracked. This whole campaign against India, all those marches that the churches were being attacked, the whole basis has been found to be factually erroneous. So a part of it is attributable to irresponsible statements of some individuals and a part is on account of a campaign which has turned out to be totally erroneous.

But there are Ministers in your government who have made irresponsible statements. Are they being told that this is a chance for India to leapfrog economically …

Obviously, it is for everybody to realise that and everybody has been suitably advised. There are controversies with which the government has nothing to do. A judge of the Supreme Court has a grievance against the Chief Justice of India for fixing up a particular meeting on a particular day; the Prime Minister has nothing to do with the fixation of that date. It was no part of his judicial discipline to write to the Prime Minister. Prime Minister doesn’t decide the calendar of the Supreme Court.

For long we heard of Manmohanomics. Please define for us Modinomics.

You must know the road map on which you are travelling, on which you have to take the nation and the economy. You must have the leadership to take decisive decisions in that direction. You must be careful not to deviate from that direction. That’s the policy that the present government is following. I think Dr. Manmohan Singh did extremely well on the economic front as Finance Minister. I am afraid I can’t say that for his tenure as Prime Minister.

We know well about your financial inclusion, skill improvement, manufacturing and such initiatives. Let us look ahead for a second. What second- and third-generation reforms are you planning?

India is now growing between 7 per cent and 8 per cent on its present momentum. What is it that can add further value to this growth? One, the net impact of all these steps which we have taken, particularly investments coming into sectors such as insurance and defence, the unleashing of mining, coal — its impact on power generation and manufacturing. Two, my additional emphasis on infrastructure spending, particularly on railways, rural roads, highways, corporatisation of ports; that is the next step I intend bringing in. Three, the impact of taxation reforms and the major taxation reforms will be GST [goods and services tax] and bringing down corporate tax and both my measures with regard to domestic black money and undisclosed money abroad.

If this can shrink the level of black money in society and bring it into the system its ability to add to the GDP. Four, progressive steps such as a public procurement policy which is transparent, a bankruptcy code, resolution of contractual disputes in big projects, faster clearances of pending projects, the possibility of replacing prior permissions with a regulatory mechanism … If you see the net impact of all these steps each one has an incremental value. If without these steps, we can grow between 7 per cent and 8 per cent, then this incremental value will take us further. There is an area where I want to do more when I get the next bunch of resources in my hand — the area I am going to focus on in future will be investment in irrigation. Our services sector is growing. The potential is to push agriculture up. The potential is manufacturing and infrastructure. That is where the productivity will come in. The space for growth is much higher in those sectors.

The kerosene and urea subsidies spur tremendous black marketing and criminal activities. When will the Modi government move forward on these important reforms?

On subsidy management, we have started taking steps. Diesel and petrol have been linked to market prices. Now the direct transfer in LPG has started. We would like to maintain subsidies for the poor, but rationalise [them, so] that undeserving people don’t enjoy subsidies. I think it will be a part of our long-term agenda.

The key element of your budget this year is public investments in Railways, national highways and so on, but do these have capacity to scale up for ambitious projects?

I will not be found lacking in providing them with resources. They have to optimise their spending ability. Highways certainly can, because a lot of projects have been stuck up so they need alternative executive agencies to do them.

Even elements of the Sangh Parivar are not that comfortable about the dilution of the consent clause in your Land Acquisition amendments. While you are saying that the consent clause must be diluted to ensure development, the farmers’ sentiment is ‘we know what is good for us’ and that includes development, of course, but we want the consent clause.

Who has assessed the farmers’ sentiment? Let us be clear. Even within our friendly organisations, I had a detailed discussion and the amendments which were proposed to the original Bill are based on that discussion. The 2013 bill is anti-rural India.

Lot of people will agree with that, but …

No, let me make good that point. It [2013 Act] keeps rural areas poor in perpetuity. It prevents infrastructure development in rural areas. It prevents irrigation, rural roads, rural electrification, housing for the poor — for people from rural areas who want to migrate to suburban centres and have a better quality of life and for 300 million landless labour whose best prospects of getting a job is in industries set up in rural areas. It prevents the creation of industrial corridors.

There are two sentiments I want to draw your attention to: one, for decades, state acquisition has gone on in India with inadequate and ineffective rehabilitation and compensation, and farmers just don’t want to trust the state machinery and may not be comfortable with dilution of consent, a lack of trust that may not have anything to do with your government for state acquisitions. And, second, over the past few years, farmers have become acutely aware of the valuations of land.

There is no sentiment. The power of acquisition of land is eminent domain. It is a part of the sovereign power. How would you get consent if the industrial corridor, let us say between Bangalore and Hyderabad, is to be created. Will you go in for consent of one lakh people? Therefore, you have to balance private interest with the larger interest of society. India has to take a decision whether it wants to keep its poor in poverty or whether it wants to urbanise, industrialise, wants to create urban-like facilities in rural areas or not.

Politically will it fly?

The farmers are going to be paid four times the market value of the land and therefore, whatever value they realise, they are going to get a higher value plus an R&R package. And, what will be acquired will be the most minimal land which is required for developmental activity. Ultimately, any form of development — townships are not going to be built in mid-air, railway stations are not going to be built in mid-air — they will require land. Ports are not going to be built in mid-air. National security requirements are not going to be satisfied with that. And for all national purposes including the welfare predominantly of rural areas, you will require some aspect of rural land.

Farmers seem to say we know what is good for us, but we also know that we want the consent clause.

I think you have to balance private interest with the larger public interest. That is my answer.

The Rafale deal scraps the ‘Make In India’ component. Isn’t that a reversal of policy?

The whole object of FDI in defence is to start the process of high-end defence manufacturing being started in India. This has to be balanced with the defence requirements of the country. And when you balance the defence requirements of the country, there are certain kinds of weapons or aircraft which are urgently needed. The ‘Make in India’ programme as far as defence is concerned will take its own time in order to evolve. Therefore, with regard to simpler technology aircraft or helicopters, you start the process of manufacturing in India. Even there, in one of the contracts, the contention was some which are urgently required will have to be purchased from outside. And these are highly sophisticated war weapons and therefore, those dealing with defence will have to balance it. The whole institution of importing high-end items which are urgently required won’t come to an end because of ‘Make in India’. There is no conflict between the two.

The BJP is a nationalist party and the value of the rupee for long has been a symbol of national pride for it. What is the view of the government’s main manager of the economy, the Finance Minister?

The rupee must find its real value in the market. And, therefore, that has been the policy. Fortunately, with our economy doing slightly better, the rupee has appreciated vis-à-vis most currencies in the world and it has struggled to keep pace with the dollar whereas most other currencies the world over have declined. I would rather allow the rupee to find its own level on its own market strength.

Reserve Bank Governor Raghuram Rajan has said in an interview to this newspaper that to get all the benefits of a public debt management agency, it must not be powerful enough to force debt into anybody’s hands and it should not be too close to the government. Do you agree?

Since the issue is in the Finance Bill and various opinions have been expressed on this matter, I would be speaking on this when I answer the debate on the Finance Bill.

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