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Washington, DC: A favourable monsoon projection and the structural reforms that the government has initiated this year will boost India’s economic growth in the current fiscal year, said Shaktikanta Das, secretary, department of economic affairs, ministry of finance.

“It should be upwards of 7.5% this year," he said.

In an interview on the sidelines of the Spring meetings of the International Monetary Fund (IMF) and the World Bank, Das said the government is still trying to clinch a deal with foreign investors to invest in the government’s ambitious National Investment and Infrastructure Fund (NIIF). He also spoke about India’s push for further quota and governance reforms at these international agencies. Edited excerpts:

On one hand, there is welcome news for India on the monsoon front, but on the other hand, the global economy seems to be heading towards stagnation, according to IMF’s global economic outlook. In this context, how do you see the Indian economy growing this year?

The growth projections for India remain unchanged. In India, things have not deteriorated, they have only improved. Even last year, if we would have been lucky with a better monsoon, growth rate would have been slightly higher.

This year, with the kind of initiatives the government has taken in agriculture and the rural sector, and the other initiatives with regard to structural reforms, huge public investments in infrastructure, push the government is giving to GST (goods and services tax), bankruptcy code, if we are lucky with regard to monsoon, we would be closer to the upper end of the 7-7.75% projection made in the economic survey.

If monsoon is good, we should definitely do better than 2015-16. It should be upwards of 7.5% this year.

But how much will leveraged bank and corporate balance sheets and the slowdown in exports hurt India’s growth prospects?

With regard to bank-related risks, the problem has already been identified. It is not a new problem for 2016-17. It has happened over a period of time. It has been identified and the government has put in place the necessary policy actions. Under Indradhanush, the bank board bureau has been set up and started functioning. The budget provided 25,000 crore and the changes the Reserve Bank of India made with regard to calculation of tier I capital added another 35,000 crore. So, 60,000 crore of excess capital is already there on the table. Additionally, the government is committed to further capitalize banks if required. The banks are also taking steps to improve recovery.

The various amendments to the Sarfaesi Act and the Debt recovery tribunal (DRT) act to strengthen the DRT to provide a simple time-bound process and the bankruptcy law we are bringing... All this will have a positive impact.

When the growth is slow elsewhere, exports will be low. Just before the budget, a few measures were announced, including the interest subvention scheme and the changes to the duty drawback to the scheme. Rupee is broadly moving in line with the market. We will see as and when any intervention is required in any particular sector, government will take action.

Focus in 2016-17 has to be on domestic investment and domestic demand. With the higher investment in rural infrastructure and agriculture and a good monsoon, domestic demand also should revive.

The government has been in talks with foreign governments and investors for investing in NIIF. It was also talked about when the finance minister visited Australia and now with the US. But has any foreign investor come in?

Still talks are going on. We are trying our best to clinch the deals in one or two. The CEO appointment should happen very quickly. It is a work in progress.

Why can’t you bring in domestic investors like Life Insurance Corporation of India if foreign investors are not coming in?

LIC has already committed to railways. We don’t want to create an excess government-related liability for LIC. LIC also has a commitment to its policy holders. They should do a good mix of investments.

Domestic investors are welcome but then the question is who. Banks will come in only when projects are there. Now it is premature. Banks will typically not invest in a fund.

We want it to be a high brand vehicle. We want long-term funds like pension funds to come in as investors and not banks who do not have long-term funds.

Will the NIIF’s CEO be from the private sector or the public sector?

We have called for applications. Applications are being shortlisted. Committee will do the selections.

What are the main issues India flagged in the IMF-World Bank Spring meetings?

We just completed the 14th quota review now. The 15th round should have been over by 2015. The revised timeline is now 2017. We have insisted and the 15th round of quota reforms should be completed within the time frame and the time frame should be adhered to.

The governance reforms should recognize the changed reality of the world in terms of size of economies, in terms of size of GDP measured in terms of purchasing power parity. All those issues we have highlighted.

In the World Bank side also, we have insisted that there should be additional capital infusion especially by the developed countries and that there should be a review of the voice reforms.

Now India has become an IDA contributor. Last year we contributed 200 million. This will work in India’s favour.

Did India raise the issue of better disclosures specifically in relation to the Panama Papers at the global forum? Any updates on how India is tackling this?

The inter-ministerial committee has been set up. The papers were leaked just about two weeks ago. If they need to do a thorough job, they should be given time.

We need to give some time to the committee to decide what strategy should be followed and how should it be taken forward.

We don’t discuss specific countries in global forums but issues like putting a stop to tax havens acting as repository of illicit financial flows, steps against harmful tax practices… these are general points which we have pointed out.

The New Development Bank has announced its first loan to India. Which project will they be lending to?

They are lending to Canara Bank, which will do an on-lending to various other solar projects.

Rupee bonds have yet not taken off despite the government making some concessions. Are you looking at further relaxation in the tax structure to make it more attractive?

It was announced on specific requests by some investors. There is a demand to remove the withholding tax. Apparently, with withholding tax, domestic borrowing is more attractive and cheaper than raising the money abroad.

Now it needs to be seen whether you need some rupee loan to be taken from abroad by doing away with withholding tax. The withholding tax is either ways a temporary liability since you get credit for it from the other country.

The government recently allowed states to borrow more by relaxing the Fiscal Responsibility and Budget Management (FRBM) targets. Then there are the UDAY (Ujwal Discom Assurance Yojana) bonds. Won’t excess borrowing by states pressure on interest rates?

It is in line with the 14th Finance Commission recommendations. The offtake of private sector credit is sluggish. RBI has injected a lot of liquidity into the system. The total quantum that will be additionally borrowed is not much. It will be around 15,000 crore—that is not much.

Bulk of the UDAY bonds will be private placements and not hit the market. Both the government and RBI has flagged the issue. It will not have any impact on the rates.

Is the government looking to make more changes to the gold monetization scheme to make it more attractive?

We have made all possible changes in the gold monetization scheme based on whatever suggestions have come. We are looking at increasing the number of assaying and testing centres. There are security and purity issues.

The writer is in Washington DC on the invitation of IMF as part of its journalism fellowship programme.

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