A day after presenting her seventh straight budget, finance minister Nirmala Sitharaman sat down with TOI’s Surojit Gupta and Sidhartha to discuss the messages — from politics to reforms and the broader economy. Excerpts:
Your budget is being described as a political budget and is being analysed in light of the election results. Did the original intent of the government, reflected in the interim budget, change after the results?
■ FM: This budget has every continuity from the interim budget, nothing has been dropped, everything has continued, though newer things have been added. When you say it is political, you refer to projects we have taken up for Bihar and Andhra Pradesh. But we did that for a reason. The AP Reorganisation Act must be honoured. We have been doing it since 2014. That is why backward districts fund had to be given for backward district development in both Telangana and Andhra; many institutions, AIIMS, IIIT, IIT, have been set up there. In some cases, there has been some delay like Polavaram. Now the first cabinet approval has been honoured; because it is a national project, we will have to give money for it. Similarly, Andhra Pradesh is the only state without a capital, we will give money. These are additions but it is not as if they never existed. They need to be honoured now because 10 years have passed.
In Bihar’s case, can anyone deny the devastation that happens because of Kosi flooding? Efforts were made at India’s cost to build dams in Nepal to regulate the flow of the river and stop flooding. The progress on that is still awaited and so we decided to do something to stop people from suffering. Proposal from the Bihar govt is for Kosi-Mechi dam and irrigation and there are 20 other minor projects, which we have accepted. At our cost, we are willing to send a team to assess if barrages can be built to divert water to sort out the problem of floods.
What about the focus on jobs?
■ That’s not political. Job creation has always been our priority and we have come up with a packages of five schemes.
In hindsight, could the interim budget have included steps that would have helped politically in the elections?
■ I am not in a position to assess it because I look at the budget as a statement of what we’re doing. As a vote on account, I was expected to ensure that I took care of expenditure till the time a new govt came in. That’s how we went about it, except the solar rooftop scheme, which is required for renewable energy in the country.
Are other demands from Andhra which were part of the reorganisation bill still on the table?
■ Every demand which has been mentioned in the reorganisation Act will be taken up.The demand for special status keeps coming, not just from Bihar and AP, but also from others such as Odisha. Is that something that you would want the Finance Commission to take a relook at?
■ The 14th Finance Commission and a committee under Raghuram Rajan looked at it and for 10-12 years it has been suggested as a unsustainable categorisation. There’s nothing more that I can add to it.
Your govt has stayed away from freebies but the opposition has been promising them, such as Rs 8,500 monthly transfer to women. Given that everyone wants more, how challenging is it to address their demand and convince them that it’s not good in the long run?
■ It is very challenging. Although many parties realise that it is unsustainable, beyond a point, I don’t think there’s political honesty in accepting it. You may probably justify giving a freebie today. In a public position, who is answerable for taxpayers, you have to be clear that collecting tax from someone and paying it to somebody else, however deserving that person may be, should be sustainable. You should be able to generate adequate revenue to meet primary requirements of a society: drinking water, electricity, primary health and education. You have to be honest in ensuring that you don’t borrow left, right and centre and leave a burden on future generations. Look at what is happening in Karnataka. They must honour the electoral promises without saying they don’t have money for development. You need honest debate on these things.
How do you deal with the political consequences of not offering these types of schemes?
■ You need an honest debate on how far one can go. It is not easy to say that your freebie is unacceptable, while defending my own as a welfare measure. And why should people not take the benefit of something being given for free? Buses in Karnataka are full of women who you don’t want to pay, and I won’t blame them (the women). But when you charge men double for it, eventually it’s the family paying for it.
Opposition is criticising your budget for lack of allocation of funds for some states. Is it based on facts or is there some misinterpretation?
■ This is 100% blatant misinformation. Unsubstantiated claims are being made as political narrative setting tools. Till such a time it is refuted and refuted many number of times, they will go on saying it, making people wonder what is going on. People will like to see the facts but there is a lag before truth reaches them. The opposition, particularly Congress, is brazenly pushing this methodology of building a narrative which is not backed by facts, or backed by partial facts. They hide what has happened during their govts. For instance, if I don’t mention the name of a state in my budget speech, they say the state has got nothing at all. To counter it, I will have to take a budget document, open every page and say, for this state, I’ve done this for that state, I’ve done this. As a responsible opposition, you think you have no other way in which you can put the govt on the mat, except for disinformation? This brazen method of building a false narrative, repeating it and restating it with the hope that it will stick has been tried in the Lok Sabha elections. They are trying it even now.
How will govt respond to it?
■ I will be countering it it. Every time I stand up to do that, I’m sounding defensive. If they were in power, they would be equally defensive. In the election, people voted for the opposition to be responsible, that’s why after a good struggle, they reached 99, they could not cross 100. But even after that, they don’t seem to get the message. By conducting a misinformation campaign and sounding aggressive, they want to posture that they have been very solid as the opposition. But people will see through it sooner or later. You’re filibustering and will, after a point, be exposed.
There is a lot of attention on capital gains tax and the decision to do away with indexation benefit, while reducing tax. What prompted this change and is the assessment that people will be worse off correct?
■ This perception that you will be at a disadvantage is not real. It’s absolutely not correct. The idea is to simplify the way in which different asset classes are being treated for capital gains tax and treat them similarly. That’s why it has resulted in 10% becoming 12.5% for stocks but getting reduced for others. We have gone through several cases or instances, picking up different numbers for assets, including property, bought in 2001, 2002 or 2003 and seen the taxable amount. After working it out, we have arrived at 12.5%. We have released the calculations, and you can see it. In almost every case, people have a lower tax burden under this system. Small or medium, people who are going into the market or property investments are going to benefit from it. Nobody’s going to be worse off, unless you’re a top, big investor. We are accused of working only for Ambani and Adani and they (the opposition) want to bring wealth tax and inheritance tax. Today, you are shouting at me for asking those few people, who have higher earning, to pay more.
You have announced this grand scheme for employment and skilling. But you have invited criticism that govt is interfering with the labour market and will direct the private sector. How do you address these concerns?
■ It’s not compulsory for anybody, we are nudging people to do it. Who is intruding into the private sector? By the way, you always accused us of support ing only two (groups) and not the others. Hypocrisy, thy name is Congress party.
How will the matching be done?
■ There is no difficulty on the EPFO side. It is only when we want interns to go for training, we will have to ensure that industries come on board. We will have the labour ministry or ministry of corporate affairs to look into this. It is optional. We’re not forcing anybody, we’ve had a lot of discussion with CII and Ficci and they thought it is possible to do it. It will actually help them because they will have industry-ready people, who can be employed.
Jobs are the big thrust of the budget. The Survey also says 78.5 lakh jobs are required every year. Will the measures ensure that the requirement is met?
■ First, Economic Survey does it purely from the point of the economy, it is for businesses, entrepreneurs to create jobs. We have come up with eight specific measures, they will create jobs. Once it gathers momentum, many oth ers will also find interns who come out. L&T recently said they were unable to find 45,000 trained workers. So, jobs are there but we don’t have people who can be employed.
How challenging is to deal with the employment challenge in a country where population is growing while there is growing application of AI and greater mechanisation in sectors such as construction?
■ What you failed to point out is that it can still employ that many more, though more like crane operators and not brick carriers. Today, large construction doesn’t happen in situ, material comes from some place, it is fitted as per plan, often with some computerised perfection. Jobs are still there, but no longer that manual. It is still going to take a lot of manpower, but the skill sets have to be different. You still see hundreds of people when a new Parliament building is being built or the Central Vista is being built.
But fewer people…
■ That’s right. But look at the quantum of construction — flyovers, highways, roads, ports, inland waterways. You didn’t have these many projects happening earlier when labour was just manual. You are doing 22-25 km of highways every day and everything has been scaled up.
Economy is doing well but there are price pressures, especially with monsoon being patchy and there is the challenge of climate change. How do you deal with supply side issues?
■ We will have to wait for the meteorological department to tell us whether it (monsoon) has been in the adequate range. There are several things which are being done for perishables — storage, irradiation. There is a scheme for MSME irradiation as well, which will help perishables last longer and reach the market even when it is not production season. We have announced measures to have vegetable production clusters around major cities. There are several ways in which we are managing food products, particularly perishables. We want to ensure better supply chain linkages.
India has liberal FDI ceilings. Is there a case for better marketing of India as an investment destination and dealing with some of the other issues like bilateral investment treaties, which some countries want to be simplified? The Survey also mentioned that there are some tax and non-tax concerns.
■ On investing in India, people realise that if there is one economy in the world whose macroeconomic fundamentals are strong, it is India. Investment protection agreements are being taken up. We’re talking with a lot of countries to have these agreements done wherever the trade agreements happen. I want to be clear that taxation cannot be part of investment agreements. There are some investment-related treaties, which require taxation-related matters also to become a part of the investment treaties. We are clearly hesitant.
It is Parliament which decides how tax matters have to be dealt with. Our taxes cannot be subject to arbitration or court proceedings elsewhere. Putting it into a bilateral investment treaty, and opening up Indian taxes to be adjudicated elsewhere is not right; in fact, impossible. So those are the kinds of things on which we’ll have to negotiate and negotiate for India’s sovereign position to be absolutely intact.
In the past, govt has tried land reforms and farm sector reforms but faced resistance. Will you still pursue it since economists see them as a structural constraint? Some political parties also seem to agree. Or will you leave it to states?
■ I don’t know if political parties agree, because they seem to take a politically convenient line rather than support any of these issues. In any case, on that, I won’t be able to say anything further.
You have raised the securities transaction tax on F&O and there are concerns about that segment. Are more regulatory steps required? How do you deal with this apprehension of speculation in the market at a time when there are more retail investors coming in?
■ As a regulator, Sebi is very alert. It is working to protect the interest of investors and as the regulator, it will have to keep alerting people about the risks involved. Not everything is speculation, people also want to invest and earn legitimately. Indian regulators have done very well. Our regulators are periodically reinforcing their mechanisms, but they are taking a soft touch approach and are in a consultative mode, before they bring in any regulation, thereby giving good confidence to our investors.
Are you still going ahead with the public sector policy and what is the privatisation plan?
■ It is intact and it is approved by Parliament, so we will honour it.
On small savings rate, the RBI Bulletin has periodically suggested that rates are kept lower than market-linked rates. Is the govt looking at the post-tax return while announcing rates?
■ Progressively a lot of steps have been taken to align our rates with the recommendations of the Shyamala Gopinath committee. So, it is not as if we’re deviating from the committee’s suggestions.
In recent weeks, there have been demands to ease visa and investment restrictions from China. Is it feasible, given the continuing tension on the border?
■ I’m not sure there’s anything in front of me. There may be some discussions going on in other parts of the govt.
MSMEs are another big focus area and you have addressed financing and technological upgrade -related aspects. What about compliance and inspections?
■ The finance or MSME ministries cannot deal with everything that affects them. The states in which they are located also have a role to play. However, from our side, we’ve announced major measures and I hope problems of credit, financing, problems of addressing the marketing requirements, problems of purchase of equipment have, to a very large extent, been addressed.
There are concerns over the provisions in the Income Tax Act on booking expenditure for payments that are overdue beyond 45 days, which is a provided for the in SME Development Act. Does that law need to be dealt with first?
■ Yes, whether they want 45 days, which has existed in the law for several years, or 90 days or whatever else, is something which relates to the MSME. All that the MSMEs requested finance ministry to do was let them get the tax benefit. By not paying within the stipulated time you (the buyers) are violating the MSME Act while also claiming the benefit for it (payment that was not made). MSMEs said they (buyers) are not paying them but they’re getting tax benefit out of it. So the change has to be in the MSME law, that’s what I’ve been explaining.
One of the manifesto promises was to extend Aayushman Bharat to senior citizens and the expectation was that it will be done in the budget.
■ We will wait for the health ministry to come up with details.
You have sought to rationalise the provisions related to TCS and TDS. There are close to 50 entries and now you are getting a lot of data. Will the review of the income tax law also deal with these issues?
■ Let’s see what the committee is going to decide.
What will be the broad mandate?
■ Simplification.
You have now presented seven budgets, which has been the most difficult one?
■ Every budget is a challenge. Each year I feel that this one is the toughest. You think you had it all by that year, but next year there is something else.
Have you enjoyed it?
■ It’s been a great experience because you learn so much you feel that you’re doing something absolutely concrete. It’s a good thing that, as a team, all of us work together; the immense support and time that the PM gives is unbelievable. It will not be fair for any minister to expect that kind of support, and he has ungrudgingly given time to talk about budget issues.
One issue that you mentioned yesterday, was the PM’s insistence on fiscal consolidation.
■ That’s been his hallmark from his Gujarat days, he has never been profligate.
Not many of your predecessors have been in this job for five years. Do you get satisfaction that you have been able to see the results?
■ Budget-making today is so different from what it was earlier. The budget document itself is a lot more transparent and accountable, and that’s not to say that they were not accountable earlier. But the document speaks for itself because everything is on board.
Do you get a little disturbed because of the attacks on social media?
■ I think I’ve got used to it although I do take some messages seriously because they can be from people who have genuinely been affected and they are voicing it through social media. May be that’s one way they are trying to reach out to govt, to the finance minister, to the Prime Minister. I do take some of the messages like an SOS. But some of the messages are very vicious: in the language that they use and the tone with which they say. But it’s not possible for me to allow that to upset me. If there is toxic language, I leave it there.
