Finance minister Pranab Mukherjee talked with Bloomberg-UTV television channel after presenting his annual Budget for the year starting 1 April. Edited excerpts:
Why is it that today, despite all the efforts, reforms are still a bad word among the political class.
No, reform is not a bad word. Some are accustomed to a controlled economic regime for a very long period of time. In political vocabulary, the terminology is a little different. But India as a state is reform-oriented.
What will convince the political class that reforms can actually change the lives of Indians?
Everybody accepts reforms. But, for instance, sometimes, some political parties have different perceptions. That does not mean they are not reform-minded or they want to change it. But the concept of the reform differs from different political perspective.
Do you see the convergence of view within the parties itself and between the parties on what the way ahead on economic growth is?
Of course, the political convergence of the views are developing. Political consensus is absolutely needed. For example, some of the major tax reforms are going to do it. I cannot implement GST without the cooperation of other political parties and here, surprisingly, the Left has already extended cooperation. In the last meeting of empowered committee of state finance ministers, all three Left state finance ministers have supported the introduction of the constitution for moving towards GST. Therefore consensus is absolutely necessary.
Economic reforms are being blamed for corruption.
I don’t think that there is a co-relation with economic reforms and fiscal misdemeanour, or financial misdemeanour. There is no co-relation. Corruption is the issue which has to be fought and has to be fought collectively. Whether there is economic reform or not. It is irrespective of that. That is a job of the government, the primary job of any civilized government, to protect its people, to prevent corruption, to maintain law and order and peace.
Services sector is seeing almost jobless growth and manufacturing is suffering.
We should also have to look at the manufacturing sector and the manufacturing policy could be announced. But I agree with your general point of view that compared with the other emerging economies, contribution of the manufacturing sector to Indian GDP is comparatively less. In agriculture, because of a lack of adequate investment, its contribution to the GDP is a little reduced this year. It is evenly balanced and I hope this will continuously follow.
Clearances of new projects are taking a lot of time. There has been a lot of talk about a single-window clearance again. How much progress can we expect on that?
That is the issue that we will have to address, I know that there are certain problems about the acquisition of land, about the environmental clearance, about the clearances from different agencies. Procedural reforms are absolutely needed and we are addressing these. Somehow, the position is being taken that development is against environment or environmental protection is against development, that position should not be there. Both environmental protection and industrial development are complimentary to each other. A group of minister has been set up to reconcile some of the areas where there is confusion.
But sir on ground level.
There are well laid out rules. Somebody violates the rules then the environment ministry points out that you have violated the rules. Then they start whining, knowing fully well they indulged in these violations. Therefore these aspects are also to be looked into.
So you hold the industry also responsible on this?
No, quite a few. There has been occasions that I would not like to name, but there has been occasions where the well-known, well laid-out rules were not pursued, were not followed. But it is not a question of blame game. After all, we want development, and for development, we shall carry every section to it and remove all obstruction.
Industry needs deeper debt markets to improve availability of affordable long-term finance. There is not enough credit in the system.
Always there is a difference between the requirement and availability. That is the problem of all developing countries, including India. Of late, we are getting definitely more and some of the budgetary exercises, which I have undertaken, are to have more resources. Why didn’t I increase the excise duty to its original level?
This year, there was no need of stimulus, but I did not want to do it. Why am I restructuring the government’s borrowing from the market in consultation with the Reserve Bank in a manner that it does not disrupt the market because private sector must have its share for production and development.
The announcement, which I have made for the FII investment in mutual funds, will facilitate resources coming from abroad so these measures are being taken.
FDI in retail and insurance has been an expectation for the industry. Six-monthly review which means we can expect a faster decision?
No, decision will depend. Raising the FDI depends on legislation. That’s why I seek the cooperation of all political parties who are represented in Parliament.
You talked about the FIIs and investing in mutual funds. The point of view which is coming through that this could open a new window of unaccounted money coming into the markets the way the participatory notes controversy was there perhaps because Sebi is not in a position to look at everything. Know your customer (KYC) norms may not be adequate.
I think KYC norms are quite adequate and Sebi is in a position to overview it but if certain deficiencies are found out somewhere that can be addressed.
There is also a sense in your budget that there is going to be a cap on social spending because you want to maintain the expenditure. What does it mean for the social spending and the projects that are already on?
I did not mention social spending, I wanted to put a cap on the expenditure because fiscal consolidation needs to be maintained. I cannot allow fiscal expansion which took place during 2008-09 and 2009-10 because of the international financial crisis. We have to come back to the part of fiscal consolidation. Therefore, there should be overall expenditure control and that is what one of the job is, if I want to achieve the target of fiscal and revenue deficit.
What about the impact of rising oil prices?
Of course, uncertainty in the oil price is a serious issue and which we shall have to address. As it is uncertain, I cannot allow any speculative figure to be picked up. Because I myself have seen very recently in the contemporary period in 2008 how the oil prices fluctuated.