Just as India was showing initial signs of emerging from a slowdown, finance minister Nirmala Sitharaman was forced to confront a totally unexpected challenge: a pandemic. The government had to redraw battle plans and impose a lockdown, which triggered an economic collapse. Over the course of last week, the finance minister has outlined the contours of a ₹20 trillion stimulus package. In an interview on Tuesday, Sitharaman defended the government’s decisions and said it will not hesitate to take more steps to support Indian businesses. Edited excerpts:
The relaxation of the lockdown curbs has begun. Are you expecting a surge once the postponed consumption demand kicks in?
I am expecting a surge in growth, but it may be gradual because the labour component is something on which the industry is either remodelling themselves by depending more on local workers, skilling them, or probably waiting for (the return of) those people who have gone home. The surge, from that point of view, may be gradual, given the uncertainty related to labour.
India Inc. is not pleased that they missed the stimulus bus.
I heard all of them and then took a decision. I do understand each has a perspective on what is best. I welcome all views. I have done what is best in my view.
I do not wish to sound patronizing and it will be unfair for me to judge anyone but it is worth remembering that before covid-19, when we all felt the economy was slowing down and an incentive needed to be given, the corporate tax rate was cut to an unimaginable extent—it was a drastic step.
But did I get anything out of it? We showed that we want to give big-time help to industry. Possibly, some green shoots should have been visible by January, by which time firms could have saved enough for making fresh investments, but God willed otherwise.
It is not as if I have not responded to industry.
One charge being levelled against you is that you are a fiscal hawk. This is ironic because previously it was a much sought-after moniker.
I am hearing it for the first time. I would assume that is a virtue. I am dealing with public money; I am dealing with money, every penny of which I am answerable to. I have to be cautious.
And again, even if they suggest that you have to be generous, it is only the second month of the year.
So you are not ruling out more measures?
I am not ruling it out. I have to see how it (pandemic) develops as we go further.
How will you be funding this stimulus package? Is monetizing the deficit on the cards?
I have kept all my options open. I have to see where it goes.
What is your assessment for the next three months?
I can’t see the pandemic retreating. We are still in a lockdown mode.
These schemes are getting implemented and people will have some money in their hands and start businesses again. This may not be the best time to make an assessment.
Are you prepared to give tariff protection against cheap imports?
Let us see what are the things we can do to make our industry stronger. We will not hesitate.
You mentioned we are entering a new paradigm in a post-covid world. Could you elaborate?
The world is not going to be the same. When we lift the lockdown, the working environment, the office and interpersonal contact for business is changing, the world over. Some companies have said working from home could be the norm permanently.
One of the big things that has changed, a paradigm shift, is that administration, urban local bodies, wards and panchayats will now have to—I am not speaking on behalf of the government—develop a credible data source of people and their skill sets, the industry engaging them so that, God forbid, if any such situation happens in future, we can handle them.
Like farmers and industrial workers, for the first time, we are now discussing migrant labourers as a cohesive unit for policy making?
I will appeal to all those who are interested in humanitarian issues to positively engage in this. We should create a lot more local job opportunities. I am not saying they should not move around in the country. But the point is whether we can scale their skill sets, which is crucial whether one is a local worker or a migrant. But many migrant workers come to urban areas because there are not many local job opportunities.
Even if we cannot engage all of them in their respective local areas, at least some of them can have opportunities there. Why is it that some kind of economic activity does not take place in certain places and everyone there is compelled to move out?
We now have to rethink designing of policies. If there is labour surplus in one area, we have to examine why economic activity does not absorb them there.
Almost everyone has appreciated the big ticket reforms you have announced but some of them such as dismantling APMCs have been on the table for sometime. What makes your government so confident to execute them?
As I said, it is not something new. After 2014, we also worked on it. I remember once attending a governors’ conference at the Rashtrapati Bhavan, even in that it was discussed. The national integration council meeting with CMs, it was discussed there as well and many states had agreed to take it up. In my budget speech, I had very clearly said that I am giving a model APMC Act, please get going with it. We gave the nudge but I am pinning my hope now that with Covid-19, it can’t be the same thing. Farmers cannot be restricted to sell to licencees only, why can’t they sell to others?
The underlying theme of this has been entitlement versus empowerment. This is a fundamental shift. Can you elaborate the government’s thinking?
I don’t want to speak for the Prime Minister but whether as chief minister of Gujarat or as the Prime Minister, his faith was on empowering people. Entitlement does not empower. When you give dole, before and after that, your position is no different. He has never believed in entitlements. That does not mean he does not recognise (the need for giving benefits). For instance, under MGNREGA, we have given more money because those who return to their villages and face uncertainty, should still have an opportunity. Ideally it will be better if a work opportunity arises either in his own place or elsewhere. It is a sound philosophy because ultimately the dignity of a human is more when he thinks he is contributing, earning honest money and taking care of his family.
The politics of entitlement is a much easier card to play
Maybe so but today’s aspirational India wants education for their children, good healthcare and a dignified way of earning. He wants to do some work and earn honest money. A responsible government should give that opportunity to everybody.
Now that Central government’s fiscal position is severely affected by the Covid-19 pandemic, do you think financially compensating states to the extent that they get an annual 14% GST revenue growth is still viable?
As long as that law (GST (Compensation to states) Act, 2017) exists, I have to honour it. In the GST council, the revenue situation was explained much before the pandemic. The council was ceased of the matter and that the cess revenue wasn’t adequate. That was also one of the issues on which some discussion commenced on how the 14% will be paid. I will have to meet and talk to them about it. We will have to see what the Council wants.
One big concern states have voiced is the conditions to their additional borrowing that has been allowed. Is that fair in a cooperative federalism model?
I am not giving them their money on condition. It is a borrowing. Secondly, these are not conditions set by me. These are conditions given by the Finance commission. I am not attaching conditions to the devolution money. That is not done at all. I have not done it and I don’t believe in that. This is something through which I have asked for what the Finance Commission has recommended as necessary reforms. What are the kind of reforms and why will any state have objections? Is it ideological? Am I asking for something that will benefit the very rich people? Is portable ration card for you and me? Is better and efficient electricity supply not going to help the farmer? Shouldn’t power distribution companies be paid their receivables? Reforms in the way local body revenue are organised is as per the Finance Commission’s recommendations.
Are you prepared to spend more on health infrastructure?
I have said in my announcements that health infrastructure will definitely get more funds. It will also be supported by viability gap funding for people to create social infrastructure at the block level.
The contact economy, that is, sectors like hospitality and aviation, is facing a massive crisis with job losses and they may end up as non-performing assets.
That is why banks are going to give them additional working capital and term loans without asking for collateral. Banks will extend this credit facility to all MSMEs. With the definition of MSMEs being expanded, a larger number of companies will benefit. Banks are aware of the potential of big borrowers.
((Pretika Khanna and Anuja also contributed to the story.)
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