‘Days of what US does today, world does tomorrow have gone’

NITI Aayog Vice-Chairman RAJIV KUMAR favours setting up a firm which would hold the government’s shares in PSBs, an idea suggested by the P J Nayak vommittee. However, he tells Indivjal Dhasmana, more needs to be done for for improving the functioning of PSBs. Edited excerpts:

There are demands for privatisation of public sector banks (PSBs) in the aftermath of the PNB fraud. What is your advice to the government?

It is not such a simple issue. First, there is a law which prevents the government from diluting its equity in PSBs below 50 per cent. So, that law has to be amended and, given the arithmetic in Parliament, it is easier said than done. Then finance minister Yashwant Sinha considered it in the previous NDA government. I don’t see this happening, given its practicality and due to the fact that all stakeholders of PSBs are not for it. I think the solution to improve the functioning of these banks has to be found within the framework we have got.

What is your idea of a solution? For instance, the recommendation by the P J Nayak committee to set up a Bank Investment Company (BIC)?

That is one part of the solution. BIC will at least mean you have a body of domain experts who can supervise PSBs on a day-to-day basis. I support the idea of a BIC. That will help make an arm’s length distance between the government and operations of banks, which will improve corporate governance.

Second, what has come out at PNB is that there was no complete grasp of digital banking. So, we should set up a group of

known experts who can do an information technology (IT) audit. Ideally, each of these banks should be restructured around a digital backbone. At the moment, the digital framework is laid over the existing structure. There now are new banks, such as one from Singapore, opening only digital branches. You need such a restructuring for PSBs to be in sync with current technologies. An IT audit would not require much time.

Was banning of Letters of Undertaking (LoUs) by the RBI a correct step to curb such fraud?

I can’t really comment on RBI’s step. I grant them that expertise.

Experts say we are reverting to protectionism by having raised customs duties in the Union Budget, while posturing that we are antiprotectionist. Do you agree?

I think that is not true. After all, import duties were hiked on only a few commodities and at a very disaggregated level. We are very much abiding by the free trade agreements we have signed. The recent WTO mini-ministerial showed India’s commitment to a rule-based trading system. The Budget measure is intended to give breathing space to those industries which have been facing onslaught. Given to enable them to meet infrastructure, logistics and skill requirements, so that they can face global competition and create indigenous capacities. You have to give some breathing space to industries such as electronics but you don’t do the same now for automobiles, where local preferences given in the past has enabled the players to export. Similar success can be achieved in electronics. We still are a liberal and open economy.

What about US President’s reciprocal tax? Won’t it lead to protectionism and trade war?

I don’t think so. The days of ‘what America does today, the world does tomorrow’ have gone. It’s not that we are entering into a protectionist world. This has been the old American habit. It settles issues bilaterally. They want to correct a trade surplus in favour of China. China will have to relent a bit.

What about India?

Our trade surplus with the US is hardly anything compared to what China has with that country. I don’t think we will negotiate bilaterally. Though the US is a large market for us, what will we relent on? I don’t see India retaliating or buckling or relenting. We have taken a stand that we are for a multilateral trading order and not for such measures. I think we will stick to our stand.

Trump’s move undermines WTO. Does it not?

The US has done it in the past. There is a liberal world order and this is a blip. I don’t think this has a lasting impact on the world.

Critics take on the government for not creating enough jobs. But a survey by the Labour Bureau show a jump in jobs in the manufacturing sector. What is the country’s job situation?

I have never believed in the charge of jobless growth. I am a strong believer of the results that Ghosh and Ghosh have come out with by analysing EPFO data. Even that data does not include figures from employers such as Uber, Amazon, etc. These are not covered in any data.