The World has changed many times since Pranab Mukherjee first became finance minister 27 years ago. But right now he is in the midst of the most momentous changes.
With an Interim Budget and an election victory behind him, and a full-year budget ahead, Mukherjee would presumably have lots on his mind, but understandably be coy of revealing much. Saubhadro Chatterji of Business Standard caught up with the finance minister and tried to decode the signals. Edited excerpts:
What are your priorities?
In short, my priority areas will be to make efforts to bring the economy back on track and into a higher growth trajectory.
Naturally, all necessary measures will have to be taken to ensure that. The financial crisis, which started in the middle of last year, had its adverse impact on our economy, like on many other economies.
Although we maintained a reasonably high level of GDP growth, it was not anywhere near the 8.9 per cent that was the average between 2004-05 and 2007-08, and much less than the 9 per cent-plus that was our objective.
But how much time it will take for us to get back to that growth is yet to be seen, because the information we have says that the process of recovery is not yet visible, particularly in the major developed economies.
Our exports sector and the external sector are badly hit. The manufacturing sector has also slowed down. But we were able to sustain growth of 6.5 to 7 per cent last year. The latest figure will be available after May 29. So, growth is our top priority. All other issues are related to that.
In your interim budget speech, you quoted Amartya Sen and talked about the need for commitment towards 'Downturn with security'. What did you mean and how do you propose to achieve it?
I won't be able to say much on this because that is to be spelt out in the forthcoming Budget. In principle, I agree to do it but that will be spelt out in concrete terms in the Budget. We require growth and for that we require money. If all government resources are not adequate, you have to borrow.
Naturally, the fiscal deficit would increase. Therefore we have to strike a balance between these two competing requirements -- of growth and prudent fiscal management. And it will be my effort to strike this balance.
Your last Budget, in 1984, was presented much before the start of the economic reforms era. What is your idea of economic reforms?
Economic reform is a continuing process. One set of reforms or proposals becomes outdated after its implementation and with the passage of time.
So, this is a continuing exercise. I do not believe it can be stop-go-stop-go. It can't be like that. So, in various sectors necessary changes relevant to the requirements of the situation are reforms to me, as I understand.
How do you rate the growth impulses in the economy?
The problem is, as I mentioned to you, that there is an adverse impact. Recovery is not yet visible. Naturally, growing market economies like India and Brazil are also affected. Our external sector, exports, the information technology sector, and the flow of resources from external sources have been adversely affected.
And these have slowed our growth. Now we have to see and analyse the impact of the three stimulus packages we announced to overcome the adverse impact. The first package was announced on December 7 by the prime minister.
This was followed by the second package in January.
We had a two-pronged approach: On the fiscal side, we made necessary corrections and, on the monetary policy side, the Reserve Bank of India reduced the CRR, SLR and certain other rates like the repo rate.
I announced the third stimulus package during the Interim Budget, which also gave around Rs 30,000 crore worth of concessions. The full impact of these packages could not materialise because for the last three months no new and major initiative could be taken, as there was the Code of Conduct in place.
As these were the Lok Sabha elections, the states too were affected by the Code of Conduct. For instance, to give a boost to the automobile industry, we decided to buy 15,000 buses under the JNNURM scheme. Funds were allotted, and even released, but procurement could not take place during this period because the Code of Conduct was in force.
Now what we have to do is to make an assessment of how quickly these things can start. Practically for three months -- March, April and May -- we could not do anything. I cannot reveal the assessment because all these things will come in the Economic Survey.
Is there a need for another stimulus package?
We shall have to work that out because I have already said on this same question that whatever is necessary for the improvement of the economy will be done. You may give any nomenclature for that step. But the step will be taken. But I can't spell out in what form and to what extent.
What role do you see for public sector enterprises?
The public sector has to play an important role in the Indian economy. Public sector enterprises in the banking sector and the insurance sector have played a vital role during the recent global financial turmoil, so that our system didn't collapse totally.
The UPA government's two key initiatives -- special economic zones and the public-private partnership model for developing infrastructure -- have raised a lot of debates. . .
PPP is the most important mechanism through which we can build large projects, particularly in the infrastructure sector. And SEZs, too, have made substantial contribution, particularly to exports. But some areas of weakness have been noticed in the SEZ policy. Those will be rectified.
There is a demand to extend NREGA to urban areas, too. . .
Employment is the most important instrument for alleviating and eradicating poverty. Various schemes have to be implemented for that. The schemes which are applicable to rural areas for the rural economy may not necessarily be applicable to urban areas. But variations can be made.
What reasons do you think were instrumental in the Congress' victory in the elections?
One, successful completion of the UPA coalition government under the leadership of the Congress. People believed that the Congress only wanted to go it alone and did not know how to share power with other parties.
We have proved that this general perception is wrong. Our party that ran India's government for 45 years from 1952 can also complete five years of a coalition government.
Second, the performance of the government. Never before in three consecutive years was there over 9 per cent economic growth.
Third, ambitious programmes like the debt waiver scheme to the extent of Rs 65,000 crore (Rs 650 billion), benefitting over 35 million farmers in villages.
Why did the Congress get so many seats in Maharashtra? Maharashtrian farmers committing suicide drew our attention to this aspect and this was one of the reasons why we undertook the debt waiver scheme. Then there was NREGA. People earned Rs 6,000-8,000 while living in their own villages. These were massive exercises.
The United Progressive Alliance government's three reform initiatives in the insurance, pension and banking sectors were blocked by the Left. Now that you do not need the Left for support, will you pursue these issues?
All that I will say is, wait.
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