Budget Roundtable: Finance Minister Nirmala Sitharaman answers burning questions on economy and growth

At the Budget Roundtable, Finance Minister Nirmala Sitharaman talked about steps to revive the Indian economy and enusre growth after presenting her first Union Budget which presented the vision of making India a $5 trillion economy.

Finance Minister Nirmala Sitharaman along with the industrialists and economists attending the Budget Roundtable. Finance Minister Nirmala Sitharaman along with the industrialists and economists attending the Budget Roundtable.

Days after presenting her first Union Budget, Finance Minister Nirmala Sitharaman interacted with the who's who of India Inc and leading economists of the country at India Today's Budget Roundtable. In this interaction, the Finance Minister laid down the government's plans to revive the animal spirits in the Indian economy.

Below are excerpts from the questions by top industrialists and economists for FM Sitharaman, and her answers to them:

Rahul Kanwal, India Today TV: We are delighted to have with us, at the India Today-CII Budget Roundtable, India's newly minted Finance Minister Nirmala Sitharaman, straight after having presented her first Budget. I want to start by asking you how confident you are that the moves that you rolled out in this Union Budget, will be adequate to revive the animal spirits of the Indian economy?

Finance Minister Nirmala Sitharaman: I am very confident. I am giving incentives and messages that the government is with you. We are doing it to ensure that India Inc trusts the government. And the government is full of trust that it is this entrepreneurship which has kept this country together for a very long time. So, we recognise the role India Inc has to play. It is the government that is now saying very clearly that we are with you. Whether it is sufficient to bring the animal instincts out, I am not the person to judge. I'll keep responding as and when inputs come. I have taken every input which has come in and try to fit it all into a picture.

India is still the fastest growing country and that's because of you (India Inc). You are contributing to the growth of this country. In fact, I went to the extent of even coming out with some of the currently out of the box thinking, which can still be questioned by the Parliament. I am super-conscious that this is the last year of the 14th finance commission. The 15th is going to submit its report in November. The government will look into it and then that's going to be a very important part of the Budget 2020. I am not coming with the explanation to say why I couldn't be even more daring in the Budget. But, those who were dealing with the conservative approach to business, will appreciate that beyond this, in the last year of the finance commission and having had one budget is already given which is interim, still takes away nearly one-third of the year. So, I'm planning for the rest. I've set the direction, given the big picture. I have made sure that areas which have to be immediately touched upon to indicate that we are very committed to reform. If I am aiming at something for 10 years, I am aiming at the mid-course target. I would want to ask, tell us more to make the animal spirits come out.

Rahul Kanwal: Do you believe this economy has bottomed out. How much more time will it be before you see your moves lead to the economy jumping back again?

Sitharaman: I have a lot to abide by. I have to keep the discipline. I know there's a lot of argument going around. India needs a lot of development, jobs, you don't need to be really so confined to FRBM. But, as long as there's a law and as long as a senior respected predecessor has given me a glide path, can I disobey it? So, my fiscal discipline is definitely something which I will have to follow with all due respect. But, that doesn't mean that I have watered down my commitments on the infrastructure spend. I have given you even the quantum that is going to be spent. I have also told you the speed with which we are building. And it is not just surface transport, it is also looking at Indian waterways, Sagarmala. So, the belief that the consumption will have to be pepped up, is implicit in what we are saying. One is the same golden path that we have followed earlier, infrastructure spending. Secondly, make sure through your schemes which are largely attending to rural areas and adopting technology, the DBT. You put money in the hands of people, Nothing gets lost in the process from Delhi to any other village. So, real money in real-time reaches the hands of the people, for consumption to be boosted. On the other hand, the larger picture where the infrastructure spending is committed. A situation for which the government is not responsible - governance, liquidity, solvency issues - brought a little crisis before us. I have offered a solution for NBFCs, working together with the Reserve Bank. Once the credit flow goes through the NBFCs back again, your buying of cars, homes, agriculture equipment will be restored. So, consumption from the point of investment in infrastructure, putting money into the people's hands, to make sure the institutions which are the ones facilitating credits, are all doing it.

Sanjiv Goenka, Chairman, RP-Sanjiv Goenka Group: Will this government divorce the politics of tariff fixation from the economics of tariff fixation?

Sitharaman: We will start working on it. This is something in which states will have to be taken on board and we will talk to the states. The UIDAI has gone through a phase, we have to read the scheme. Also, make it more efficient. It started off very well. It had an implication of politics and tariffs.

So yes, we will be working with the states to keep politics different from tariffs.

Uday Kotak, Managing Director, Kotak Mahindra Bank: There is a significant monetary policy room, along with interest rates, if we work in collaboration with the central bank.

Sitharaman: I look forward to a very positive engagement with the Reserve Bank, in the government's point of view. We want to exchange a lot of thoughts with them and there will definitely be certain positive energy between the two institutions. In fact, I was surprised when the (RBI) Governor said that he welcomes the decision of Rs 70,000 crore for recapitalisation of money for the banks. I see a phase where positive energy is coming out between these two organisations.

We have placed a lot of emphasis to understand what should happen in developmental financing. You had development banks once. We are making sure that the committee that we have announced will go into the details and quickly tell us how to get over the problems and focus on development finance.

Ila Patnaik, economist: Over the last 10 years, other countries are reducing the corporate tax rates. You have taken a step of increasing the cap from Rs 250 crore to 400 crore. Should we expect that this is the direction in which you will go later when fiscal and revenue constraints ease?

Sitharaman: I would like to say yes, but then I will get asked next year if I am doing it this year. We would like to do it at the earliest. Now when I am looking at SMEs and medium-sized units, nearly 99.7% of all units have been covered. The remaining 0.3 per cent is the one making a difference toward taxation. Ideally, yes, we would like to move to cover everybody. I am also conscious that other southeast Asians countries that we compete with are coming below from 25 per cent to 20 per cent. The elephant example was not said without a motive. We certainly don't want to go where we already were reasonably treated. The sooner I'm able to come down to those rates, I'll be happy. My eyes will be on it.

Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII): The budget in India is a big deal and every focus is on the finance minister. Does the Budget merit so much of attention? Aren't we putting too much pressure on the government? Is there a way to diffuse this type of attention on one single event of the year? How do we get the states on board to take this reform movement forward, with the bold ones coming in terms of labour and land, which is extremely important?"

Sitharaman: The states and the local bodies benefit from the finance commission recommendations, money reaches to them. Institutions like CII cannot any longer just satisfy themselves by dealing with union ministers or chief ministers of the states. There has to be more engagement with institutions from every state, like those who deal with electricity, water, work with exporters. Awareness on what legislative changes are going to impact them will have to be talked out. Many of the legislative changes, which have financial implications, go through finance bill and they are the ones which are going to directly hit us, in terms of good, bad or some of the changes which are drastic. Because it has always been a top-down driven kind of a socialist era picture, we tend to look at the numbers that come out of it. Beyond that, there are a whole lot of numbers which every government keeps on doing which doesn't even get covered. It's alright to watch the Budget, to place importance to it. Actual action happens at the stakes, it is there that we have to put a lot of pressure and get work done.

Samiran Chakraborty, Chief India Economist, Citi Group: Has it been the primary driver for you to think of encouraging more foreign savings? And when it comes to your budget maths, is it true while you have assumed revenue growth of 25 per cent from the provisional estimates of FY19? The tax revenue is going to give you a big delta. How much are we ready on the asset monetisation front?

Sitharaman: I think we were ready the last time. For example, CCEA had created a whole list of companies you could disinvest in. On many of them, the work had progressed to almost near the logical conclusion. Since it was an in-principle approval, there was a mindset that we should wait and watch and look for the opportunity, rather than to rush out. On many of those, where we reached to the threshold to clear, this logic was prevailing. We still have to test how the market will be. That list is almost near completion. We should not have too much of waiting time now testing the market. We will also have to create a clear picture of what challenges prevail other than the market in clearing them. And that is why the target that has been given for the disinvestment, even on the revenue racing of resources. I would think that the targets are not unrealistic, as given in this Budget. I have been very insistent on a realistic target. And here it is only a lakh and five thousand for disinvestment. We are not going to be driven to the targets, we think it can be easily attained.

Ajit Ranade, Chief Economist, Aditya Birla Group: Where do you think we can improve the quality of spending in terms of savings?

Sitharaman: The Prime Minister, when you look at effective utilisation of the schemes by using technology, actually has saved money. In the initial years, between 2014-16, there was a lot of examples thrown at us. Similarly, with every DBT, where the total money reaches to the beneficiary, a living beneficiary who is entitled. No other government has been imaginative enough to use various methods through which they ensure wastages are stopped. We are definitely not in such a situation as Prime Minister Rajiv Gandhi, who said for every rupee that I spend, only 16 paise goes. Today I can say, for every rupee that I spend, that money which is expected to reach the account is reaching. But, there is always room for improvement.

Sunil Munjal, Chairman, Hero Enterprise: The automobile industry will be spending around 1,50,000 crores rupees by next year. The government telling us to switch to electric mobility might not be the smartest thing. If you force us in one direction, all of the cost which is currently being spent becomes reasonably useless. Also, there is a massive multiplier of economic activity and jobs, which will shrink almost instantly. So overall, directionally if you can say we want to get cleaner, and we will work with the industry to pick which technology seems viable in the long run and then support, push, incentivise and fund those. Because at this moment, we are pushing in one direction, we don't know if it is the most efficient technology.

Sitharaman: Are we pushing? The usual thing about a government would be you seem to tell us at the nick of the moment. Why don't you point us to the direction which we have to go in, give us enough time and incentivize the process, and so on. In this case, what is it that we have done? We had started telling people we will incentivise you so long as you can move out of the fossil fuel and move towards a more renewable energy based vehicles. Simultaneously, aren't we spending substantial amounts to increase quality public transport? Aren't we also, because of the commitment to the global environment, simultaneously working on generating renewable energy?

What has come out of the survey - using behavioural economics to guide the Indian economy than to force it in one direction. But, we have said that the priority would be public transport to start with and in that EV will take precedence. So, if we are spending money to get public transport to be bought in bulk, we will prefer EVs.

Shobana Kamineni, Executive Vice Chairperson, Apollo Hospitals Enterprise Limited: Ayushman Bharat is a fantastic opportunity for us to show the world and help India. Can you tell us what would be in it for the private sector, because you don't ask the lawyers to go into the villages, but doctors? And where are we going to see those growth relievers especially for us to keep investing?

Sitharaman: On health, I may not be able to expand other than saying, we are making sure that for those who can't afford it, the government stands by them to the extent of the amount we have announced. But as regards to your sector particularly, what is it that you would expect the government to do? In India, we have a classic example and your father was a pioneer in it. You came at a time when it was unimaginable for people coming in and establishing, something which was a total greenfield area. You started it and you set an example. Brilliant, a lot of people have come in now. You should be the one to tell us. I am not suggesting that this is how the model works. But, a private sector hospital, we from the government don't believe should be exclusively only for those who can afford it. Ayushman Bharat comes from the point of view of good health care (preventive and curative), will have to be affordable for even the poorest of the poor. So, we are going in that direction of being able to support, fund, give that kind of insurance. But, what is it for the sector should be? And when it was a question of sealing, capping the price of certain, we knew that there was an area of the free market. I want you to tell me.

Aroon Purie, Editor-In-Chief & Chairman, India Today Group: Why can't the government privatise public sector banks? You have spent huge amounts of money to recapitalise them, and this is taxpayers' money.

Sitharaman: I am actually groping for words. No, I think we have shown our commitment towards making banks more efficient. The fact that we have reduced them by consolidating the existing banks. We are looking at the recap with an intention of making them far more  efficient. Clearly we are not indirectly putting up with activities which we shouldn't be doing. But then, of course, it has to take its own course in the sense I am not trying to water it down but we need to be clear on what is the role of public sector banks. They have played a very significant role. We can't forget it. At the same time, how efficient should they be in terms of their organisational structure. What is lean and mean public sector bank. These are critical things on which we have to apply our mind rather than take a call saying we have got a mandate, now just move ahead, do it. We will do it, but do it with more application of mind.

Dr Naresh Trehan, Chairman and Managing Director, Medanta: There are some difficulties in realising the true potential of Ayushman Bharat. What it means is that the rates are such, and how much headroom the government has to adjust the rates.

Second is a continuous process. Because wages are going up, raises are needed. It is an expensive process and we have to realign ourselves, but you'll have to take it into consideration that these are real costs and we are cross-subsidising. What has happened to us in the meantime is we fought very hard to get the patients exempt from GST. But what we did not realise is that the input costs are still with us. So we lost 7 per cent of our revenue by not being able to get that input tax credit. My request is that if you can relook into it and bring it back into balance, it will help us to support Ayushman (Bharat) even more. Because of the fact that it will require huge infrastructure, we have actually been granted by some rules before that we are an infrastructure industry. But the finance part of it never came through. So my second request would be if you can look at it that if we can borrow at a lower rate for Tier-II, Tier-III cities, and rural areas.

The third thing: a huge amount of money is owed to us by the CGHS scheme and the ECHS scheme. If you can look at some of the tweaking that can be done to help us, especially payments of CGHS and ECHS dues, it'll help us hugely to participate and serve Ayushman (Bharat) in a better way.

Sitharaman: Particularly on the ECHS and CGHS, I'm aware of the problem as long as I was in Defence. We every now and then released tranches of it as we didn't want our ex-servicemen to suffer. But we also had a problem with a lot of over-billing. And that became a bigger issue. But I'm not faulting that on everybody, but it might help me to get a picture of what your association feels in terms of the dues for both the CGHS and ECHS so that I can help better.