Amidst Global Headwinds, India is Seen as Bright Performer and a Driver of Growth
Back from the spring meetings of the IMF and World Bank and at least three investor conferences in the US, economic affairs secretary Shaktikanta Das told Deepshikha Sikarwar and Vinay Pandey in an interview that the government’s decisionmaking speed and measures to improve tax administration came in for praise. Edited excerpts:
What is the sentiment on India? At the IMF and World Bank meetings, sentiment about India continues to be very positive because amidst global headwinds, India is seen as a bright performer. The Indian economy has not just managed to remain afloat but also performed well at 7.6%. The expectation is that it is only a few countries such as India that will be drivers of global growth in coming years.
There is an increasing acceptance of the fact that current weightage given to voice of countries does not reflect today's global reality and it needs to be modified. There seems to be growing acceptance of our contention that higher weightage should be given to PPP (purchasing power parity) based GDP calculation.
Are we putting in place measures to take growth to a higger trajectory? Finance minister Arun Jaitley has said growth could rise to 8.5% in the event of a good monsoon. Our focus is to maintain growth and try and improve and reach 8% and then exceed it. This year, if we get a good monsoon... our growth would be towards the upper band of 7-7.75%, projected in the Economic Survey, and exceed the current year's growth. Our policies would be designed to keep our economy strong, to build on our resilience and to build firewalls to insulate it from global headwinds. Main focus of our policy will be the domestic segment to maintain growth and move to higher trajectory. India would also like to have a greater share in world GDP and trade and all policies would be designed in that fashion.
The Niti Aayog has recently drawn up a plan to achieve 10% growth. We are at present looking to reach 8% and then exceed it. So it can be done in a gradual manner. Over the medium term we can try to reach to 10%. Last year we had a massive capital spending push from the very start of the financial year. Are you looking to maintain that tempo? Focus is now on implementation of budget announcements. We, from the department of economic affairs, have written to all ministries for speedy implementation of budget announcements, part of which is capital expenditure especially in railways, highways and agriculture, largely the spending ministries. Besides, public sector enterprises would have their own capex plans. Last year, the revised estimates for Plan expenditure were higher than the budget estimates. So this year our focus will be to ensure that Plan expenditures are incurred and with adequate quality.
On the policy front, how is the government gearing up? Are we likely to see continuance of the reform push? One is with regard to investment climate. FDI (foreign direct investment) emerged as a major source of investment in the country. Domestic investors are hit by the twin balance sheet problem. We have sufficiently liberalised FDI norms and the effort would be to liberalise further in whichever sectors possible. The idea is to put more sectors under the automatic route and effort would be to make it more and more process driven.
In parallel, we will continue to hold FIPB (Foreign Investment Promotion Board) meetings twice a month. For the next FIPB
FIPB process further and liberalisation of the foreign direct investment policy and putting more items on the automatic route. Secondly, a capital expenditure plan has been put in place to achieve that kind of growth in railways, highways, irrigation and other spending departments for developmental expenses
Third is to push all the other reforms spelt out in the budget. The goods and service tax bill and the bankruptcy code are already in Parliament. The government will try to push both of them. There are a number of other bills that are in the works — public utilities dispute resolution bill, amendments to Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) and DRT (debt recovery tribunal) and for transport sector. The amendments aimed at the transport sector would catalyse lot of investments in regional and local transport facilities.
The budget this year is very tight and there is little room for revenue shortfall. India has never met disinvestment targets while the telecom department has questioned budget estimates on spectrum. The industry has also said there may not be big demand . Given these two risks, how confident are you of being able to push through the capital spending? Disinvestment targets would be achieved. There are two components to it — strategic India has been one of the best performing markets among emerging markets, so India should be able to attract capital through FDI as well as capital markets and non-strategic. List of CPSUs (central public sector units) has been finalised by the department of disinvestment. With regard to strategic, the Niti Aayog is in the process of identifying ones that would be taken forward. Now, the capital market conditions are also looking good. If you see globally the liquidity that is available where would that go? Indian market has been one of the best performing market among emerging markets so India should be able to attract capital both through FDI as well as capital markets.
As far as spectrum is concerned, this debate goes on within ministries. There are three components of proceeds from telecom. One is licence fee that gets .₹ 20,000-22,000 crore a year. Then there is spectrum auction from which we expect to get about .₹ 50,000-55,000 crore. Then the third component which is from the litiga- tion from where we expect revenue of .₹ 20,000-25,000 crore. A shortfall of .₹ 96,000 crore one would not anticipate at this stage. We shall deal with it if we face any shortfall. There are ways of making it up during the course of the year.
A key issue holding up the economy is non-performing assets (NPAs) in the banking system. Are you any closer to getting a handle on this? The NPA problem is getting under control. And the equity infusion (in banks) has already taken place. Through reclassification by the RBI, about .₹ 37,000 crore will be the additional tier I accretion. Our budget provision is .₹ 25,000 crore that we will release soon as they need. So, total equity injection would be .₹ 62,000 crore this year. If any additional infusion is required it would be done. The banks are also already in the process of taking effective recovery action. Together with the amendment to Sarfaesi and DRT and the bankruptcy code will definitely assist in the process of revival of the banks. Banks have a problem and it’s a huge challenge for the economy to deal with but it is being managed.
On the FRBM (Fiscal Responsibility and Budget Management), the budget had announced setting up of a panel to look at a new plan. We will soon set up the committee. We are finalising the members and the terms of reference. A number of suggestions have also come from the recently held state finance secretaries' conference. We will take all that into account and constitute the panel shortly.
Are we looking at a countercyclical framework? Broadly yes.
You will be interacting with rating agencies soon. What will be your pitch to them since the government has undertaken a lot of steps as also stuck to the fiscal deficit target? We will place before them all the key initiatives that the government has taken to revive growth. The list is pretty long. Overall in every sector the government has taken large number of steps. The government is acting on all fronts. We will explain to them why we expect this year's growth to be higher than 7.6%.