Finance Minister Nirmala Sitharaman believes the BJP will come back with a good majority. In this interview with Prasanta Sahu and Shobhana Subramanian, she says the government will continue with reforms and not let go of schemes which empower the poor.
I strongly believe we will come back with a good majority. There is no reason to think the mood has changed just because the opposition wants it to be changed. I don’t know from where this negative campaign has started that BJP may not get adequate numbers by saying we didn’t perform well in the first two phases. The Home Minister has clearly said that the number of seats (for BJP) will be 370-plus and you will get to know that by 12.30 pm on the counting day. The opposition is only trying to mislead people.
Are we going to see an aggressive agenda on privatisation going forward?
Aggression need not be in your face… We should have the right to choose the right time. We can’t be unthinking administrators. We are saying minimum presence of government in businesses. To arrive at minimum presence, I would have to see how many of them have to be disinvested, how many can be amalgamated to create a scalable and large unit and in some cases, the strategic core has to be retained. Recent privatisations have resulted in the creation of more jobs (in Air India for example).
Have you done a review of the 15% tax rate for new manufacturing firms? Has it worked?
We need to look at it much more carefully to what extent new businesses have come in and capacity has been increased. The offer of a low tax regime for new firms expired in March. A new call may need to be taken in the Budget in July whether we want to extend it further. The lower tax rate for new manufacturing firms was announced just before Covid-19… To be fair, I think many of them lost the opportunity… we will take a carefully considered decision.
Do you think the new income tax regime needs to be sweetened a bit to bring the remaining taxpayers into the fold?
I don’t know if it is due to a lack of sweetening, they remain where they are. The old tax regime existed with exemptions added year after year. To wipe it all off from the old regime and give some kind of sweetener in the new tax regime will never really be satisfactory. Each one of them has been tailored differently. So, shifting will happen when taxpayers find it not adequately rewarding to remain in the older system.
How do you see the cancellation of Tesla CEO Elon Musk’s visit to India and his almost immediate visit to China?
India is pitting itself for the strength that it has. I wouldn’t think that any investor’s decision should be framed like is he coming to India or is he going to China. In the EV sector, India is also building extraordinary capacities. Everything takes its own time. We will work on policies that will work for Indians as well as others. It is for India’s sake, we want investments to come in. It is in this frame, that we look at the decisions taken, let’s say by Elon Musk.
Why has gross FDI declined? What can the government do to make India more attractive?
Global uncertainties are growing… India’s central bank takes calls itself in the Indian context. But, most Western central banks synchronise actions. As a result, investible funds and their movements are very severely influenced.
Today opportunities are absolutely clear, yet, uncertainties are caused by the interest rates, inflation, the US Fed’s decision, or even the talk which has now begun of possible stagflation in some countries. With the speculation (on likely conflict) about Taiwan and the South China Sea, you see the fluctuation in gold prices. The central banks are buying gold. The uncertainties about the currency and the fluctuations in the exchange rate are the thermometer, which shows the temperature. All this definitely will have an impact on the flow of funds. We are looking into this very seriously.
Why isn’t investment by the private sector gathering momentum?
If you look at some sectors, you will find them wanting. But there are sectors where they moved aggressively such as renewables. In new areas like battery storage, charging stations and green ammonia, we are having investments which are mostly driven by domestic investors.
How will you supercharge India’s manufacturing sector?
We need to have a lot more dialogue with industry, more from the point of view of what they need. It was ironic to hear from some domain experts and economists that India should give up on manufacturing attempts. It is not a good thing to ignore manufacturing or build the service sector so much that you forget manufacturing.
Inflation has moderated… Is it time to bring down the cost of funds?
A lot more pulse of the economy needs to be felt. An understanding is required that inflation control is not going to happen just through monetary policy-making. There is more to inflation control through the fiscal domain. Monetary policy cannot any longer tell us that it is for inflation’s sake I am remaining where I am. It has to have a broader look at the economy. An element of inflation also triggers growth, you cannot ignore that. Today, monetary policies have greater challenges when you look at exchange rate fluctuations. The dollar is posing more questions than answers today as a global currency. The shift that many countries are doing away from the dollar, is also a major issue, which monetary policy experts will have to study.
Will the government look at giving a guaranteed pension under NPS?
I will wait for the (finance secretary-led) committee report on the National Pension System (NPS) and for the report to be completely analysed.
Are we expecting aggressive reforms in Modi 3.0?
Reforms are something in which the BJP and PM Modi inherently believe… We have emphasised that our attention will go towards the frontier sectors such as space, renewable energy and rare earths as well as building capacity within industries for a transition towards greater use of AI and making governance more transparent by using technology. We are not letting go of schemes which empower the poor.