Will have to borrow to meet debt waiver costs: Devendra Fadnavis
Maharashtra chief minister Devendra Fadnavis, who in June last year announced a Rs34,022 crore farm loan waiver, has admitted to stress on the state’s finances and the need for extra borrowing that would widen the fiscal deficit. In an interview ahead of his second appearance at the World Economic Forum (WEF) in Davos along with Prime Minister Narendra Modi and Andhra Pradesh chief minister N. Chandrababu Naidu, Fadnavis said Mumbai was still in the reckoning to develop an International Financial Services Centre (IFSC); Union finance minister Arun Jaitley said in Parliament in December that India, which already has an IFSC in Gujarat, could not have another at this stage. Edited excerpts:
What is your agenda for Davos?
Davos is mostly a networking forum. Not just the sessions but more important are meetings with developers. In my last experience I have seen that you get to meet everyone and eventually it fructifies into investments in the state. This time as well I would be interacting with business leaders and inviting people to (the) Magnetic Maharashtra business summit in February 2018. Maharashtra is one state where there is opportunity in every type of business. In last three years we have seen that Maharashtra has performed very well on all indicators...Nearly 50% of FDI (foreign direct investment) has come to Maharashtra. The recent Deutsche Bank report says 50% of all major infrastructure projects (in India) are in Maharashtra... So I think Maharashtra is doing well and we want to showcase this strength of Maharashtra to the people so that we get a lot of investment.
Has there been a follow-up on the memorandums of understanding (MoUs) you have signed in the previous business summits and at the Make in India Conclave in Mumbai in 2015?
Contrary to the notion that MoUs don’t fructify, 51% of the MoUs we signed at Make in India have actually been realised. The country average is around 31%.
Are investors expressing concerns over things like the agitations taking place, for example the Dalit and Maratha agitations? Is that a concern?
No one has expressed that concern to me so far. The law and order situation in Maharashtra is very good. You know agitations have been taking place in every state. But despite that no business is affected. In Maharashtra, the industrial situation is very peaceful. Those industries which have established themselves in Maharashtra are our ambassadors because in all the forums they talk about Maharashtra and they say how Maharashtra is doing well, how the industrial atmosphere is very good and how they are prospering.
On the farm loan waiver, you initially were against it but later you granted it. Now, as you seek investment, is there a sense that farm loan waiver is pulling Maharashtra’s economy down?
See, I was never against the farm loan waiver. I had two major points on the farm loan waiver and in my statements in the assembly I have made those clear. One, that loan waiver has to be timed well. Because if you time it in a drought year, then although a farmer’s loan gets waived and he gets a fresh loan, he again goes into a debt trap because he cannot repay that loan. But when you also provide him with irrigation facility, electricity which we did in the last three years to a large extent, then only the loan waiver works. Secondly, so far as our financial position is concerned, if you spend so much of money on loan waiver, it brings a stress on your economy. But, having said that, we have kept our economy in a very sound position. So if you look at the parameters like debt-GDP ratio, revenue receipts-interest payment ratio, all the parameters are still the best in the country. We still have kept a little fiscal space to borrow over and above. We have not exhausted the entire fiscal space. So although there is stress, financially we are not in a bad situation.
Because of this loan waiver do you think there is going to be extra borrowing?
Yes we have to (borrow more). At least for a year, our fiscal deficit would increase but it still would be under control and within the parameters. But compared to last year or what we have been maintaining, it would increase.
Is the agrarian crisis still a concern for the state/s economy?
It will always be till we reach a certain level of sustainability. But with this model of infrastructure-led development, we can mitigate the crisis. When we talk of shifting the number of people dependent on agriculture towards other sections of economy, the intermediary is infrastructure. In fact, infrastructure opens up doors to other sections of economy to accommodate that human resource which is otherwise accommodated in the farm sector but for which the farm sector has no capacity left.
On building the IFSC in Mumbai, Gujarat has apparently stolen a march with the Gujarat International Finance-Tec City (GIFT) shaping up well. What are the options now for Maharashtra after finance minister Arun Jaitley’s statement that we cannot have two IFSCs at this stage?
I met the finance minister after his statement and he clarified that there is no bar on allowing BKC (Bandra Kurla Complex, the business district in Mumbai) as the IFSC. On the contrary, he said that BKC can be complementary to GIFT because the GIFT city does not have what BKC has and vice versa. GIFT has space, we don’t have. But we have the advantage of already being a financial centre. So I think a complementary model can be worked out. Secondly, in the financial technologies, whether it is a financial services centre or a commodity exchange, it is all about distributed ledgers. So we are working on distributed ledger technologies and we will come out with a module which will have the financial services and will attract lot of investment. A group is working on that.
When can we expect the group to come out with its report?
Very soon, we are working on two-three fronts.
Could you elaborate?
We are working on fronts like developing a synergy between GIFT and Mumbai IFSC. Now bankers have also suggested that they would like to have more synergy between GIFT and Mumbai and they think it would be more beneficial for them.
Maharashtra has been one of the big automobile hubs in the country. But increasingly with the shift to electric vehicles, a lot of companies have announced plans for Gujarat. Are you planning any incentives for this industry?
Yes, we are making a new policy and there already are two investment proposals under consideration. I would not like to name them at this stage. Hopefully the policy would be announced before 18 February when the Magnetic Maharashtra business summit begins. There may be some MoUs signed on this front at the summit.
After the twin shocks of demonetization and goods and services tax (GST), small and medium enterprises, especially those in textile hubs like Bhiwandi near Mumbai, have turned sick. Do you have any plans to revive them?
I won’t say they have fallen sick. The basic problem is of a mentality. Those who have adopted to the new regime, they are doing well. But there was a section which thought that paying taxes, duties, electricity bills is none of their business. Now, after demonetization and GST, it is very difficult to run a business without showing it on the record. There are some people who have not reconciled as yet to the new regime but I am sure they will have to. Jobs are important but you cannot have a totally non-compliant regime just to support informal jobs. They have to come into the formal sector and they have to be compliant with the regime. People are coming to terms. Even in Bhiwandi, I won’t say there is 100% normalcy but 80% of the business is normal.
What is your vision for ensuring job creation?
I will come back to infrastructure-led development. See, world over, jobs have been created when the governments invested in infrastructure. The model of infrastructure-led development we are following is a time-tested model. The investments we are making in the infrastructure, also thanks to the centre, if you compare it with what was done in the last 15 years, are simply unprecedented. That will create jobs not only in the infrastructure but in other sectors as well.
This is an election year in many states, which may set the tempo for the 2019 general elections. Do you think the Bharatiya Janata Party (BJP) narrative is shifting away from development to caste-based politics?
We are not shifting the narrative. Our focus will always be on development. Basically, our opponents cannot compete with us on the development issue, on transparency. That is why they create issues out of non-issues and vitiate the atmosphere on the basis of caste. I don’t think they will succeed. You know, the population of the aspirational youths we have. They are interested in jobs, not caste. There is a little unrest which is created on caste issues but that it also related to jobs. The root cause is economic. I think if we are able to showcase what we have done, are doing and what we will do, we can overcome this unrest. It is unfortunate that in the 21st century, principal opposition parties are resorting to only caste-politics.
On the Bhima-Koregaon issue (of an attack on Dalits), you said there was an element of conspiracy. Could you elaborate?
I will come out with more at a later stage. What happened on that day is condemnable. But after that a few political parties tried to exploit the situation, which is worse. Political parties should try to build harmony in the society. But on the one hand, you say that communities should maintain calm. On the other, you call names for some communities. It was a deliberate attempt and people also understand.
The new finance commission is going to be basing its calculations on the 2011 Census. What is Maharashtra’s stand on that? Southern states are opposing this since their population has declined and states with higher population growth may benefit.
We have to be very practical on this. Any planning which is not based on the current statistics fails. Now, if you look at the history of financial commissions, we have always lost out because successive commissions have always put Maharashtra in the highest bracket. Successive finance commissions have given around 47% weightage to the per capita income gap and Maharashtra is a high per capita income state. In other words we are the biggest contributors to the national GDP in terms of taxes but we don’t get returns in that proportion. But ultimately, when we are living in a federal structure, there may be strong states and weak states and we have to accommodate everybody.