India one of the few economies that is doing well: FM

The results seem to be slowly coming in and the best is yet to come and therefore that is what we believe so I am here really to assure global investors that things are happening in India but global investors are also very competent and very clever people- they analyze things for themselves and they can also see where the challenges as far as India is concerned are and the areas where India is likely to grow. Q: You spoke about restlessness within government to try and achieve the kind of growth targets that you have got but there is also restlessness among foreign investors and domestic investors and I am sure they have shared some of those concerns with you that things are not moving as fast as they ought to, that things haven’t changed on the ground. I know that the government doesn’t buy that argument but if you were to give them a clear road map in terms of what are the priorities in terms of specific reforms that you intend to carry out, what is it that you have told them, what is the message?A: First of all let me contest the position that things are not moving on the ground- things are moving on the ground. When your revenues in the last two months increased by 37 and 39 percent and these are indirect taxation revenues, a very large part of which is attributable to growth in the manufacturing sector, now things are moving on the ground. These are very easy media phrases to use because you don’t see things happening on a roundabout or on a road, things are happening as far as industry is concerned, things are happening as far as services is concerned. Now despite a very poor monsoon last year you didn’t go down, you still went up though very marginally so. Now, as far as the government reform program is concerned, now is the time for action.

As far as legislative reforms are concerned, we have done quite a few of them. The taxation reforms are on the ambit, I have already said that direct taxes are going to be brought down further- from next year you will start seeing the impact. Indirect tax reforms we are making the changes which itself is capable of pushing up the economy- that is the GST.

Putting in a large amount of money in to infrastructure, putting in additionally a very large amount of money in the future years as far as irrigation is concerned- that is a lesson that I have personally learnt that we need to invest in and the two specific areas where we can grow much faster is manufacturing on the strength of investment in infrastructure. Some areas where the private sector is capable of investing, some areas where the private sector may be somewhat slow and therefore the public finances have to take the lead and agriculture is an area, rural infrastructure is an area- if we contribute, we will see the results. Now states which have actually invested in agriculture have seen immediate results.Q: Since we are talking about agriculture the cabinet has taken the decision to hike MSP and this was a demand being made by various state governments, the fear was that the government may do something populist but you haven't done that, the average hike is about four to five percent. Has this been a conscious decision and is this a message that you are trying to send out that this government come elections or no elections is not going to board on populist decisions?A: We have a large amount of food grain surplus in this country. There are particular categories of food grain where you don't want to invest further in, in fact you want to persuade people to divert to other areas. We need to go in for oil seeds, pulses rather than everybody concentrate on wheat or sugar cane or rice for that matter. Therefore we have to go slowly and at the same time some increase is necessary because input costs have gone up and secondly the growth in rural areas, the real income in rural areas have to be increased.So, giving some increase so that agriculturists can also gain partly is one area we are concentrating on. We are going to increase spending on MNREGA this year for instance, that is pumping in money into the rural areas so there is better purchasing power as far as rural area is concerned. So you have to balance inflation with the impoverishness of the Indian farmer. So, we have given adequately at the same time it must not have such a huge impact as far as inflation is concerned.Q: Since we are talking about inflation it brings me to interest rates and it is no secret that the government would expect or would want interest rates to come down even further and much more aggressively and faster. In your assessment do you believe that there is room now for additional interest rate cuts or do you think that - I know it is a decision that the governor will take but what is the North Block view?A: The North Block view has always been that we need interest rates which are competitive. You can't expect industry to borrow at very high interest rates and spend on infrastructure.Q: So clearly they are not competitive?A: You can't expect the ordinary consumer or even the retail sector whether it is housing or it is vehicles or any other area to borrow at a very high rate and spend and therefore everybody would like the interest rates to come down. At the same time the Reserve Bank has a dual responsibility. They have to manage inflation, they have to manage growth so that the two can coexist itself. Therefore the Reserve Bank has done fairly well as far as the inflation is concerned, from a peak of 11 percent plus they have brought it down to about five percent and in the last six months between January and June the central bank has cut rates thrice. I would have liked to see it more, most Indians would have liked to see it more that is a responsibility that the Reserve Bank has. Let us wait for the monsoon, at the moment the monsoon situation looks somewhere better than what was being predicted earlier and I am quite sure as a responsible institution they will respond to the situation as it emerges.Q: Here at the NYSE and forward markets commission here has taken up the issue as far as what the Fed intends to do on the interest rate front. The question now is of the timing now whether it is September or it will be the end of the year, is this an issue that you are going to be taking up for instance when you meet the treasury secretary. How concerned would be of a taper tantrum? A: We are concerned because the US interest rates and monetary easing here will have an impact on the global market. So India can't say we won't be effected but we are far more stable, we are far stronger today. Our fundamentals are far better today and therefore whatever situations comes that has to be part of US internal decision. Our role in influencing that is negligible. Therefore we will accept that situation as and when it comes. I am concentration on strengthening Indian economy and therefore I can't make it absolutely immune as far as these global trends are concerned but we must be strong enough to weather any storm.Q: Speaking of bringing in investments into India, today the Foreign Investment Promotion Board (FIPB) has cleared Foreign Direct Investment (FDI) proposals worth of Rs 6,000 crore in the conversations that you had with global business leaders in the US today, what do you see as investment opportunities that they are looking at, what have they expressed to you in terms of concern?A: I think there are two things -- one is that as far as global investors are concerned, amongst the options that they have India is a priority option, the other economies world over are not doing as well as India is and therefore there is a huge appetite as far as India has in order to absorb this investment.Second is having had a terrible experience in the previous three-four years in particular, they want to be assured of policy stability particularly taxation stability and I think the amount of damage which was done to India's credibility by things like retrospective taxation, by reform processes coming to end...Q: But that continues to be a concern -- the minimum alternative tax (MAT) issue for instance has once again raised the issues though you may say it is a legacy issue but investors continue to be concerned about it?A: The MAT issue - certainly as you answered the question yourself - is a legacy issue. It is a legacy issue which is being sorted out in India. For the future, it has been sorted out. It is only marginally left as to what happens to the past that past will now after the vacations come up before the Supreme Court and I am sure just as several issues such as transfer pricing etc have got it sorted out by a very fair judicial process in India, we will see the end of this issue.

_PAGEBREAK_Q: We are talking about stocks here at the NYSE, let me ask you about your revenue mobilisation drive courtesy disinvestment. Are you afraid that the volatility and specially the sharp correction that we have seen and the Indian stock markets is going to hurt your disinvestment plan and we haven't heard any forward movement on your strategic stake sale either with the exception of a few hotels that the government has identified?A: Let us be very clear. The Indian markets have to calm down a little. There are several restrains which are there when the public sector decides to divest and therefore you would like to divest when the markets are more stable, the markets are more calm. This can't be the trend throughout the year. As and when the data keeps coming out and now the fresh data seems to be an encouraging data as far as manufacturing growth is concerned, possibly as far as the monsoon is concerned, as far as the revenues are concerned. Since this is a positive data coming in the markets will stabilise, we have in the pipeline approved transactions worth of almost Rs 50,000 crore. Therefore putting them in the pipeline and then going through a month by month or literally week by week should be possible.Q: When do you start to see the action picking up on the ground?A: I can't tell you, I can't speculate because the markets are involved but I can tell you we are in a state of readiness.Q: What about strategic sale because we haven’t seen forward movement on that?A: Strategic sales as I have said, I would be confining in the first instance to the areas, which we have said. If loss-making units - there is an option, hotels there is an option and if some other case comes up, we will consider that option on a case-by-case basis.Q: Residual stake sale in companies like Hindustan Zinc and Balco, the companies are now looking at a merger and that has been given an approval at least by the boards, what is the government's position?A: I must tell you that even honest transactions as in the case of hotels previously, as in the case of zinc earlier, stirred an unnecessary controversy. Now, I hope that controversy comes to an end with CBI also giving an indication that that was a perfectly honest transaction.The confidence of the civil service in spearheading those drives will certainly improve. We have already put in place adequate amendments to the prevention of corruption act also, so that honest decision-making doesn’t attract provisions of that act. I think in areas like defence purchases, in areas like divestment, these two changes will certainly play a very significant part.Q: But specifically on the Hindustan Zinc issue because as you said the CBI is likely to close the investigation for the want of evidence.A: I have only seen headlines in the media and if that were to happen, I am sure it will send a good indication and strengthen the government's ability to take an appropriate decision.

Q: You will not need to amend the act?A: I don’t want to comment because that matter has been argued and reargued in courts, I would rather reserve my comment on that. Q: I want to ask you about the infrastructure story because you talked about the infrastructure thrust- I understand that the guidelines are being worked on, when can we actually see the trust take-off? A: The structure of the trust is being worked out and very shortly we will release what we think is going to be the structure of the trust. There will be some government investment in it, we will ask other Indian entities to invest in it. Q: You had talked about Rs 20,000 crore in the Budget, are we likely to see that number come down? A: No, the number won’t come down; the monies will be kept in readiness. The monies will come from government or state instrumentalities. It is not very difficult to reach that target as far as we are concerned and then we expect international investors to also pool in as far as that trust is concerned and then resources out of that trust could be diverted into any of the areas.

I can assure you in infrastructural areas like rural roads, highways railways; the inadequacy of capital is not going to be an issue this year. It is their ability to spend which is the primary issue. Q: Speaking of the reform agenda going forward- you have talked about the ability to bring down taxes. Do we have clarity now on the exemptions that are likely to be phased out? A: The revenue department is working on it, as an when they finaliae it, we will then give an adequate notice publicly of the exemptions that we want to bring down. Q: In terms of economic legislations we do have the next parliament session coming up. The law minister and you had meetings with farmer’s unions, is there   any thought or consideration to review your position as far as the consent clause is concerned? A: I must tell you that in my meetings with the farmer’s organizations have been very positive.Q: But they said consent must be brought back? A: They have given me a written notice and their suggestion is contained in that notice. There is some flexibility I read in whatever is the written memorandum given to me.  Q: And on the GST, I understand two committees have been set up just today- one to look at the GST rates and the other to look at the legislation part of it. Do you feel confident of GST being able to roll out? A: I feel select committee is moving and it is moving positively. Q: So, you expect the Congress to be onboard? A: Members of parliament from all political parties realise their joint responsibility. Q: Do you expect trouble in parliament on account of the fracas involving Sushma Swaraj and how much of a setback is this going to be for your government? A: There is no setback at all, I have already clarified- she acted perfectly bona fide and issues will come up and certainly government will be ready for any discussion on the subject.