Interest rates have gone up. Will this affect the government’s plan to revive the economy, which in the last budget was largely through a boost in capital expenditure?
Well no, because with crude prices internationally behaving the way they have and… situations such as the RussiaUkraine matter, when we prepared the budget, there was no clue about the war. But certainly… there was enough and more speculation on the rise in commodities, rise in crude, and also the global disruption in the supply chain… even as we prepared for the budget. Also to be fair, the US Fed had very clearly indicated that they were going for quantitative tightening and, therefore, I do not think we were caught by a surprise by the Reserve Bank of India (RBI) taking its own step and I do not see it affecting our infrastructure investment.
Did the RBI rate increase come as a surprise?
The last MPC, I think, had sort of given an indication that it is time for them to also act. It is the timing which came as a surprise to many, but the act, people thought, should have been done anyway — to what extent, could have varied. So, in a way, it was a synchronised action — Australia did it… and that night US really did take the first measure. So, I see a greater understanding amongst central banks nowadays…the understanding of how to handle the recovery from the pandemic is not therefore unique or typical for only India, it is a global issue.
In the neighbourhood, high fuel prices, inflation higher than ours, and depleting foreign exchange reserves have caused a problem similar to perhaps what we faced in the early 1990s. Is that a worry and was this discussed at the Fund-Bank meetings in the context of India?
No, that was not discussed, although of course the discussions pertained to the neighbourhood… This is not a boast — I do want it to be put on record because you spoke about what was discussed in Washington. There was a great sense of admiration that we kept doing reforms even during the pandemic…that India did not allow its poor to suffer, particularly the way in which the foodgrains programme has been handled. There was also a clear appreciation… that the Prime Minister literally led from the front and did not give a feeling that the country is probably unsure of how to handle it… Repeatedly, a fact that I heard was India leading the way in terms of digital economy, the payment system, the way in which we could use (this) during the pandemic and that being done in a very cost-effective manner. And the way in which we have adopted technology to make it simpler for income tax or GST has also become a topic of conversation.
You went to Germany after that with the PM. What were your takeaways from those visits?
The recovery from Covid even after IMF bringing down the global GDP growth, India remaining at the top as the fastest-growing from among comparable economies, and the fact that India… is now the hub for sourcing many things which were otherwise in one basket. There is a clear recognition both in Germany and also in the various meetings that I had in the US that India’s economy now has become the next best where investments are happening…Atmanirbharta did not shut doors, we are actually trying to strengthen ourselves.
Because of geopolitical developments, subsidies are going up. The Pradhan Mantri Garib Kalyan Anna Yojana was extended recently. Will that affect the fiscal math?
As regards the food programme, we did understand (until we can) be sure of (the poor) earning their livelihood comfortably, we wanted the food programme to be extended, for which of course the outer understanding of a limit is about Rs 2.10 or Rs 2.20 lakh crore. In a way, mentally I think that calculation has been within our minds and even during the budget preparation. The fertiliser thing last year itself, even unexpectedly took a very big chunk out of our budgetary provisions and we had to bring in extra during the supplementary demands. This year even as we went in because of the way in which the crude was playing up and because of the ways of the supply chain disruptions, as I said, commodities we also had these three elements of inputs which go in for fertiliser productions. So, we were conscious that even this year we may have to give bigger numbers for fertiliser subsidy because the intention is not to move it on or burden the farmers with it, so to an extent we were prepared for an additional allocation both for the Anna Yojana and also for fertiliser.
The biggest macro challenge right now is inflation. What’s the thinking on a rejig of goods and services tax (GST) rates?
First thing I know theoretically and also observers of the economy would prefer me to tomorrow go to the GST Council and say one rate and this is it, everything is in, petrol is in, everyone is happy. No, that is not happening, let me be very clear. The committee headed by the chief minister (Basavaraj Bommai of Karnataka) is definitely going to have to submit its report. The terms of reference given to them and also the issues which have been periodically coming in the GST Council was to see how at least we go back to the revenueneutral levels at which GST was brought in. And of course, rate rationalisation has been a discussion point in over three or four GST Council meetings… that also comes in. Wherever inversion prevails, we wanted to correct that because we cannot afford to go on giving these refunds and also it has impact on the PLI scheme as well. So it is not just a black and white question of the report comes from the committee and tomorrow I call a GST Council and that is only looking at hiking rates. No, sorry, it is not happening in the next meeting.
There is a perception that some asset-sale plans have slowed. Do you plan to speed those up?
I have been hearing this from 2019. Air India happened, the same question. Neelachal Ispat happened, Pawan Hans has happened. You keep asking. We will keep doing.
Do you see a need to strengthen foreign exchange reserves further and do you have an ideal level in mind?
No, but with the revenue coming from all the sources at which it is coming and also with exports showing a very clear upward trajectory… particularly the service sector is also showing clear signs of good buoyancy… RBI has spoken about what kind of reserves they can have. They can even probably plan for higher so that confidence comes from the central bank, it is great. For us the confidence level will have to be on how we are going to boost exports, how we can get going with that, how agriculture can have the benefit of exports which is now clearly coming up. Farmers are also now choosing to sell to the trader who will export it and give them better revenue rather than look at MSP (minimum support price).
Exports have recovered smartly. Are we going to see more import curbs to narrow the trade deficit?
No, I would want to take this opportunity to say the principles governing the taxation or duties being levied even with atmanirbharta intact is to make sure that the taxation is being levied on those items which are being produced in the country. We do not want to allow the doors to be open for those which are coming in at a predatory price, throwaway price, for those goods which are being produced here, particularly those goods which are being produced by the MSMEs… Logic and principle of strengthening the Indian economy is what has governed us levying duties let us be clear on that.
Where do we stand on cryptocurrencies? This also came up at the Fund-Bank meetings.
Absolutely, a lot of countries showed a lot of interest. G20 wants to know, particularly because from this December it will be our country taking the chair of G20. We have had specific discussions on it. The FSB (Financial Stability Board), which is under the G20, had also done a lot of work on crypto. That India has chosen to go through the route of the central bank driven digital currency is also well taken.