The Indian economy is likely to grow at a rate similar to last year, finance secretary Ashok Chawla said in an interview. He also spoke on inflation, government borrowing, disinvestment and the goods and services tax. Edited excerpts:
Cautious: Ashok Chawla. Ramesh Pathania / Mint
What is the outlook for the second and third quarters?
The outlook certainly looks to be positive... The areas of services, durable consumer goods and capital goods are showing signs of revival. So on the whole, confidence coming back to the economy.
Would the economy grow at 6% or more?
There is a lot of crystal (ball) gazing involved in putting a fix on a number. That would be difficult. But what we do see is that this year is going to be close to what last year was.
The Reserve Bank of India governor has said the central bank may reverse its easy monetary policy as inflationary pressures are mounting quickly. What is the sense within the finance ministry as far as an exit policy is concerned?
I am sure they are studying it and we are looking at it.
Isn’t there a convergence?
In the sense that we haven’t got to a stage where we have to really start discussing with each other, if at all necessary. But it’s been discussed in the G-20 (Group of Twenty) forum and this was as recent as the weekend where the finance ministers met. And the consensus from all around the table from the G-20 countries was that this is something which has to wait (and) that the recovery which is taking place is still very tentative, that we need to get a little more clarity that the situation is back to normal before we can start really seriously considering the exit options.
Food inflation is clearly showing no signs of abating at this point, unlike last time... What is the strategy to clamp down on inflation?
The strategy is to supplement the domestic availability of the items that are in short supply, such as sugar and pulses, to get from wherever we can from the other parts of the world and in terms of distribution and of seeing that the items really get to the marketplace and, therefore, do not inflame inflationary expectations and hoarding and so on. That will have to be the strategy because we will have to manage within the parameters of the availability.
Do you envisage higher government borrowing due to the drought?
We have a borrowing programme which is quite impressive. In the first half, we were going to do about 65-70% of that programme. That was a conscious strategy and I think we are close to getting there by the end of this month. Given the fact that the situation is what it seems today, we don’t see any need for any dramatic or major increases in expenditure on account of the drought. So if there are requirements, those would be met in the budget by tweaking the programmes that are ongoing or making adjustments in the kinds of expenditure.
So are you ruling out any hike in government borrowing and saying that you don’t see additional expenditure due to the draught?
Pretty much, yes.
On disinvestment, would it be fair to assume that stakes in seven public sector units will be divested by the end of the financial year?
I wouldn’t really know. But these numbers are not very important. What is important is, and I think the finance minister has been at pains to mention that in many forums, that the government is going ahead with the disinvestment strategy. That is what the Planning Commission assessment also is, that we need to go ahead. So there is complete unanimity within the government on that.
Are we anywhere near the Rs25,000 crore mark on disinvestment?
Rs25,000 crore was what was mentioned in the Economic Survey. It is anybody’s guess what we will get to. But let’s see.
Is there any consensus on the goods and services tax? Are we likely to meet the 1 April deadline?
On the nuts and bolts, I think there is a lot of work that is in progress. The finance minister is going to meet the other stakeholders on 16 September, I think. So there is clearly at this stage no fix on the numbers because it is something that is being negotiated quite intensely between the Central government and the empowered group of state finance ministers because both sides have their point of view.
As regards the target for April 2010, for the present it remains and we will see how it actually goes.
What would be your number one worry at this point?
The number one worry at this point I would say is not yet inflation. The number one worry is to read clear signals of getting back to reasonably comfortable growth levels. Inflation would be number two.
Are you on track on fiscal consolidation targets?
That is our medium-term worry. Yes, we are very much anxious on that front.