Amidst Global Head­winds, In­dia is Seen as Bright Per­former and a Driver of Growth

The Economic Times - - Economy: Macro, Micro & More -

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%.


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