We’ve a game plan in mind to re­vive econ­omy: Jait­ley


Fi­nance min­is­ter Arun Jait­ley has as­serted that “there is a game plan in mind to re­vive the In­dian econ­omy’’. In an in­ter­view in Bos­ton, Jait­ley said that it would be in­cor­rect to in­ter­pret a chal­lenge to the eco­nomic sit­u­a­tion as a cri­sis. The fi­nance min­is­ter also high­lighted that the govern­ment was re­view­ing the im­pact of the GST regime on a day-to-day ba­sis and re­it­er­ated that rates need to be based on rev­enue neu­tral­ity. Edited ex­cerpts:

With the con­clu­sion of the first meet­ing of the Prime Min­is­ter’s Eco­nomic Ad­vi­sory Coun­cil, it is of­fi­cial that there is a slow­down in In­dia. Job cre­ation re­mains a chal­lenge. As a fi­nance min­is­ter, how con­cerned are you about th­ese pro­jec­tions that the In­ter­na­tional Mone­tary Fund (IMF) is mak­ing and the broader sen­ti­ment of the coun­try?

Ob­vi­ously, ev­ery­body wants faster growth and as some­body in charge of that depart­ment, we want faster growth. There is a chal­lenge and it would be ab­so­lutely in­cor­rect for any­body to in­ter­pret a chal­lenge to the eco­nomic sit­u­a­tion as some kind of a cri­sis. Ob­vi­ously, the econ­omy is do­ing rea­son­ably well. We can do much bet­ter. Im­por­tant struc­tural changes can have a tran­sient im­pact which they have had, but all in­di­ca­tions are that things are im­prov­ing and will im­prove.

In fact, you just re­ferred to the IMF pro­jec­tion. Now, if you crit­i­cally an­a­lyse the IMF pre­dic­tions with­out go­ing into the fact that they may be a frac­tion plus or a mi­nus.

The RBI has also re­duced the gross value added (GVA) pro­jec­tions, so. But at the same time, if you see from the cur­rent quar­ter, there is con­sis­tently an up­ward tra­jec­tory which is be­ing pro­jected. And if the up­ward tra­jec­tory takes you to a cer­tain re­spectable level as far as growth fig­ures are con­cerned and then, over the next few years it keeps on im­prov­ing, in a larger man­age­ment of an econ­omy, you do not look at one quar­ter, you look at the pat­tern across the pe­riod. You ex­pect the growth mo­men­tum to con­tinue now?

That is what the IMF has said. That is what most other agen­cies are say­ing. And I think all the cur­rent in­di­ca­tions and the po­ten­tial of the In­dian econ­omy is that.

You did men­tion about the struc­tural re­form. GST is one of the prom­i­nent re­forms that this govern­ment has in­tro­duced. You have made cer­tain changes to help the in­for­mal sec­tor to help the ex­porters. Is this mo­men­tum likely to con­tinue?

It is go­ing to con­tinue.

Are rates go­ing to be re­duced?

I will not make a pre­dic­tion as far as that is con­cerned. If you have seen, af­ter im­ple­ment­ing GST, it is such ma­jor trans­for­ma­tional changes that you re­view the mar­ket sit­u­a­tion day to day. Now, two very im­por­tant de­ci­sions which we took in the last meet­ing are with re­gard to ex­porters be­cause they are cer­tainly en­ti­tled to quicker re­funds, you can­not block their cap­i­tal and se­condly, you had to re­duce the com­pli­ance bur­den on the small land the medium scale. To in­cen­tivise peo­ple to get into the GST net, you had to of­fer an at­trac­tive com­po­si­tion scheme. That is what we have done. Se­condly, when you ask this ques­tion about rates, we fol­lowed the prin­ci­ple of equiv­a­lence. The pre­ex­ist­ing taxes, we put them in the clos­est bracket. And then, sud­denly you re­alise that the pre-ex­ist­ing sit­u­a­tion was an ab­surd sit­u­a­tion and al­ready over 130-140 com­modi­ties and many ser­vices, we have brought them down from the 28% cat­e­gory to 18 or 12 be­cause orig­i­nally they were be­ing taxed both ex­cise and VAT at the high­est rate. Some other items in the 28% cat­e­gory are go­ing to be taken out? Ob­vi­ously that will have to be al­ways bal­anced. I have in­di­cated that there is a scope for im­prove­ment but that will have to be bal­anced with rev­enue neu­tral­ity. You can­not say that I have no money to spend for the govern­ment, but I am re­duc­ing the rates. Ob­vi­ously, as the rev­enue goes up, your flex­i­bil­ity in tak­ing that de­ci­sion in­creases.

The fis­cal deficit tar­get, fis­cal pru­dence is some­thing that you are re­ally com­mit­ted to. Do you think you can con­tinue with that trend or you might have to get a lit­tle le­nient?

I in­her­ited an un­ac­cept­able level of fis­cal deficit and there­fore, the last three years, we have had a very good glide path and we will con­tinue on a glide path. Now, how sharp is the glide, there is a flex­i­bil­ity in that. But I think the di­rec­tion of the dis­ci­pline that we have main­tained will con­tinue and that dis­ci­pline al­ways re­warded by the mar­kets.

My last ques­tion to you is about the fis­cal stim­u­lus. There is a lot of talk about that. Cer­tain sec­tions within the govern­ment also feel, spe­cially at a time when you know that other cen­tral banks like the Fed, they are talk­ing about with­draw­ing the stim­u­lus, do you think in In­dia, there is an op­por­tu­nity to pro­vide some kind of push?

I had used a word when I was asked by the me­dia. I said there are chal­leng­ing sit­u­a­tions and we will re­spond to them. Now your fra­ter­nity trans­lated the word re­sponse into a stim­u­lus, I did not.

If not a stim­u­lus then what? What is the govern­ment think­ing? Ac­cord­ing to me, you have to an­a­lyse the prob­lem. The prob­lem is that be­cause of a de­stock­ing, you had man­u­fac­tur­ing growth dip in one quar­ter. You had, in the same quar­ter, the ser­vice sec­tor go up. There­after, all in­di­ca­tions in­di­cate the core sec­tor growth is gone up. The au­to­mo­biles, ve­hi­cles sale seems to have in­creased, the Pur­chas­ing Man­agers’ In­dex (PMI) for both man­u­fac­tur­ing and ser­vices is mov­ing up, there is an up­ward trend in the global growth fig­ures. Now th­ese are all the trends which have been com­ing there­after and there­fore, when­ever you have chal­lenges in a quar­ter or so be­cause of im­por­tant struc­tural changes, I think it would be very short-sighted to in­ter­pret those chal­lenges.

But the pri­vate sec­tor is sit­ting on a lot of un­der­utilised ca­pac­ity. There­fore, as the de­mand picks up, those ca­pac­i­ties will also get utilised. They will not get utilised in a vac­uum.

So there is noth­ing spe­cific that the govern­ment is go­ing to do?

I have not said that. We have a game plan in mind. We will im­ple­ment it as soon as we are in a po­si­tion to an­nounce what­ever.


IN­TER­VIEW The prob­lem is that be­cause of a de­stock­ing, you had man­u­fac­tur­ing growth dip in one quar­ter


Fi­nance min­is­ter Arun Jait­ley.

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