Pranab’s maiden interview as FM: Budget by July 1st week
Published on Tuesday, May 26th, 2009 at 6:47 PMAuthor: admin (5507 Articles)
Finance Minister Pranab Mukherjee, in an interview to CNBC TV18, said that although maintaining fiscal and growth prudence were both priorities for the government, in current times, growth had to assume higher significance. He was speaking exclusively to CNBC-TV18’s Udayan Mukherjee after taking over as Finance Minister.
Mukherjee said that the government would be able to pass the Budget by the end of July. “We have identified issues and areas of concern that need to be addressed in this Budget and will work closely with Dr Manmohan Singh in presenting the first Budget,” he said.
According to him, certain sectors that had been adversely affected by the global crisis needed special attention. “Problems in the textile sector need to be addressed,” he added.
The government, he said, needed to inject money to push growth. “Massive investment in infrastructure is needed to spur growth. We need to review resources, delivery systems to the core sector.”
Although, maintaining growth and fiscal prudence were both priorities, Mukherjee stated that growth at such times had to assume higher importance over fiscal concerns. “The goal is to bring the economy back on the growth path.” However, he was quick to add that the government could not indulge in fiscal profligacy.
Mukherjee hoped that FY09 GDP growth would be closer to 7%. He sees growth picking up from October.
Here is a verbatim transcript of the exclusive interview with Pranab Mukherjee on CNBC-TV18. Also see the accompanying video.
Q: What did you feel when you resumed office yesterday? Did you feel like a man who is burdened by expectations because everybody is expecting so much from your government or like a man raring to go to do reforms which some parties have not let you do over the last five years?
A: There are two three aspects in this whole scenario. I agree that there is a lot of expectation from the people. People wanted a stable government, so that the government would be able to implement its own programme. That’s why they have given substantial number, or 262 seats, to the Congress and its pre-poll seat adjustment partners, which have facilitated to provide stability in the system. I mean system of government. Therefore, it is quite natural for the government to be able to fulfil the commitments which they have made and also to address the issues which concern the life of the common man. Keeping that in view, I am fully aware of this problem. However, I am not new to the job. I am not talking of the quarter century ago when I was Finance Minister and presented three consecutive Budgets in the early ‘80s.
Even during this period after 26/11 when P Chidambaram was shifted to the Home Ministry and the Prime Minister was looking after the Finance Ministry for sometime, but when he became sick and the operation was necessary, he asked me to look after the Finance Ministry. So, I am aware of the problems which are to be addressed. I have mentioned these in my Interim Budget speech which I delivered on February 16. I did point out that some of these issues which I identified in my interim Budget speech are to be addressed when the full Budget will be presented.
Q: The full Budget will take care of all those concerns you articulated in the Interim Budget, the one which is coming up in the next few weeks?
A: Most of these would have been taken care of and addressed.
Q: You have spent a couple of days in the Ministry. Are you reasonably certain that there will be a Union Budget in the next couple of months?
A: I want to present the Budget in the stipulated date. In fact, I had discussion with the senior officers and colleagues and have told them that I would not like to have a second batch of Vote on Account, which is a normal practice as it helps members to take a little longer time and also ensures the Parliamentary Committees to scrutinise.
Q: Have they assured you that they can put a Budget together by the end of July?
A: Officers are working very hard. But it will be presented in the first week of July and we will be able to pass the Budget by the end of July because July 31 is the date by which the Vote-on-Account will come to an end.
Q: As you said correctly, you are not a newcomer to this job. But how much would you want to pack-in in the first Budget on July 1 because there is another view that since there is so much happening, you may not be able to pack-in everything on the first Budget but do reforms that you have set out to do gradually over the phase of the next 1-3 years? But you are saying that you will try and address most issues in the first budget?
A: What I have stated is that I have identified the issues, areas of concern, which ought to be addressed. What I have stated in my interim speech is that these will have to be addressed at the time of presentation of the full Budget. That is to be addressed. But we have to keep in mind that government is elected for a period of five years.
Q: Which is exactly why I am asking?
A: And what is expected to be done in five years you cannot expect me to do in one year.
Q: But the expectation is higher because in the last three years you wanted to do a lot of things, which the Left parties did not let you do.
A: That is in the areas of some economic reforms and particularly in respect of certain legislations. We will definitely try to see how best we can go ahead. But I would not like to go into the specifics of those areas, because I shall have to formulate my own views. Here, the Prime Minister has made a general statement and you have seen that the broad objective is to bring back the economy on the growth trajectory. Adverse impact of the global financial crisis on our growth scenario may continue for a year or so, because financial situation and the crisis that prevailed from the middle of last fiscal year is not yet over and the sign of recovery in Europe and North America are not very visible. Therefore, these things will have to be taken into account while formulating our policies.
Q: You spoke about the Prime Minister’s statement. How closely will Dr Manmohan Singh be engaged in the formation of the first Budget because the first thing he almost said after he took over is that the economy needs my attention? Will you and he work closely together to address those concerns in the first budget?
A: Of course. This is the job. I am his Finance Minister. I am the Finance Minister of the Prime Minister.
Q: But will he be hands on in his advice to you and will the two of you work specifically in this first Budget?
A: We have worked for the full five years together in close cooperation and even before that in the government ? in different capacities ? we had very close interaction.
Q: But will this time be even more hands on from the Prime Minister given the situation?
A: You are making too much on this point. This is not to my mind very relevant. As I mentioned, every minister is the Prime Minister’s minister.
Q: There is some talk that this time around some specific ministries like divestment may come back again in a separate form, like disinvestment may become a separate ministry. Would that be acceptable to you?
A: These are all speculations. Unless something takes place in concrete, how can I respond to it?
Q: But is that something that you are considering?
A: No, not at all, because nothing is on the plate, nothing is on the table. Why should I indulge in speculation? It is the job of my friends in media, not mine.
Q: We also heard that the issues with the DMK have been resolved, 48 hours back. But today there is no swearing-in happening with the rest of the Cabinet. Is it because possibly some ministries are being bifurcated where the finishing touches are taking time?
A: The formation of the government immediately after the election is always a difficult task. It takes some days. The first batch of ministers was sworn-in on the May 22. Some portfolios have been distributed among some of them. Therefore if we take 4-5 days to formalize it, it is not that we are delaying unnecessarily or unusually.
Q: Not saying unnecessarily at all. Is it because you are even considering other things?
A: There are many other considerations as well.
Q: Like?
A: Selection of personnel, distribution of portfolio among the personnel. In a Parliamentary form of government of India’s size and magnitude where there are more than 1 billion people, electorate are more than 710 million, having 28 states, all these balancing jobs ought to be done.
Various sectoral representations, state representations, appropriate persons to be chosen, mixture of experienced and new, old and new. All these things are not very easy. It may appear simple. But it is not so.
Q: When you presented your interim Budget you said if the country needs it at that point when the next new budget is presented and if another stimulus package is required, then you will look into it. How do you assess economic conditions now? Do you think there is a need for another package?
A: What is needed is that there are certain sectors, which have been very badly hit by the global financial crisis like export sectors, particularly textile, leather, gems and jewellery’s problems ought to be addressed. The IT sector has also been affected. We have the strength in economy. The Indian economy is resilient. It has not done as badly as some of the advanced economies have done. From that strength we have to build on.
So far as economic stimulus is concerned, we responded immediately in the middle of September when it was visible, then in the first stimulus package announced by the Prime Minister on December 7, subsequently in January and the third one that I announced in my interim Budget. So, these things have started having a good impact on it.
Naturally, it will take some time. In between the elections came and during the election period, except the routine activities, the government does not take any new initiative. So, March, April and May, in these three months i.e. from March 2 when the code of conduct was in operation, no new initiative could be taken by the government as per the law and practice of the land. All routine methods have to be taken in.
Therefore, it will take some time for us to have a total impact on it. Even before the presentation of Budget, a couple or few weeks will be available to me. So, considering all these aspects, whatever is appropriate, I will take the appropriate measures.
Q: So, you are saying that if required you can do more stimulus?
A: I am just saying that whatever the economy needs will be done.
Q: Will you not obsess about the state of the fiscal deficit because that is an important question? As a Finance Minister is that a top priority for you or is growth a top priority?
A: I have priority for both growth and maintaining fiscal prudence, but at what point of time which will get more priority is to be determined depending on the situation. For the year 2008-09, we have gone beyond the figures projected in the interim Budget. What is needed right now is stimulus, but at the same time we cannot indulge in fiscal profligacy. We shall have to restore the balance. But it is difficult for me right now to say at what point of time and what will be the time span.
Q: But are you prepared to live with a slightly higher fiscal deficit if the growth situation warrants it?
A: You are getting too much specific. It is not possible for me to tell. It is too specific
Q: But at this point is getting back to the Fiscal Responsibility and Budget Management (FRBM) a priority for you?
A: What I have said in the interim Budget is my observations. I have also given a detailed explanation in my speech. That’s why I had to cross the ceiling which was imposed and we shall have to have a fresh look at it.
Q: Everybody wants to know your views about the fiscal deficit?
A: Everybody will come to know, it is not necessary that they will have to know through you, they will come to know at the appropriate time.
Q: I was simply saying that the government’s large borrowing programme also leads to hardening of interest rates in the system. What is your view fundamentally on where interest rates are headed?
A: All these issues will have to be addressed. If you require growth, you have to inject money. If your revenue is not adequate, you have to depend on borrowing. At the same time, you have to maintain a balance and have to borrow prudently. So, striking a balance between competing needs is the job of the Finance Minister which we shall have to do.
Q: It’s not an easy job to do?
A: I do agree that it is not an easy job.
Q: But at this point given the current situation, would you say that growth has to be given or accorded a slightly higher priority than fiscal deficit concerns. Are we in that kind of a situation today?
A: We have already done it, otherwise why would have we proceeded with the three stimulus packages which we have provided in tandem with the Monetary policy announced by the RBI Governor. A substantial quantum of fiscal concession has been given in the stimulus package, the last one in my Interim Budget of about Rs 30,000 crore, and in the Monetary policy which we did by reducing CRR (Cash Reserve Ratio), SLR (Statutory Liquidity Ratio), and certain key interest ratios. The Reserve Bank has also ensured that adequate resources, liquidity is available in the system so that the productive sectors can depend on it.
Q: Now that you have a much stronger coalition at the Centre and you have the freedom of doing many things which the Left did not let you do, do you think the government will be able to garner much more by way of capital receipts to bridge the fiscal deficit. Are options like the 3G auction, disinvestment etc opening up now?
A: Those are the details of Budget. I won’t say it. What are to be told in the Budget, will be told in the Budget.
Q: How concerned are you about the state of infrastructure and how much of a focus would you accord that?
A: Infrastructure is to get adequate attention. I do believe that massive investment in infrastructure would help us to come back to the growth trajectory. So, there is need for it and. We will also be addressing the sectoral problems particularly in the export, IT sector.
Q: In terms of infrastructure, are you unhappy at the pace at which things have moved on roads etc over the last three-four years? Would you want to move at a much faster pace?
A: I would like it to move at a faster pace.
Q: How would that be possible? Would it be essentially through strengthening the mechanisms like public-private partnership? How is it possible?
A: Public-Private Partnership is an important mechanism which we should encourage. We would like to providing adequate resources and improve the delivery mechanism. The Infrastructure Committee which the Prime Minister had set up has done a good job. But I do believe there is always a gap between the actual requirement and actual performance. That gap has to be narrowed.
Q: Is the problem funding or administrative systems not being in place for infrastructure?
A: Everything is to be corrected and put in. Sometimes the administrative system, sometimes the lack of resources, it is not one reason, there are multiple reasons. In a developing country of this size and magnitude, there are many problems. Sometimes some unforeseen non-economic reasons come up for instance, constructions of roads in the North Eastern regions. In some parts, security is an important concern. It has no an economic reason, as neither funding nor lack of administrative cooperation or administrative red tapism is responsible. Security is the reason.
We constructed the Zaranj-Delaram road in Afghanistan. It is about 145 km. When I formally inaugurated the road along with President Karzai in the early part of the year, it was pointed out that for every 1.5 km that was constructed, one human life was to be sacrificed, mostly Afghan lives but some Indian lives too. So, these are the problems. These problems have to be faced in North Eastern areas, but I do hope we will be able to overcome it.
Q: When everybody expects reforms from you today, they believe that the Congress party wants to go ahead at a very high speed now and shove off the Left baggage. But is there consensus within your party on many of the reforms that were not done in the last 2-3 years, because there is one view that people inside the Congress maybe do not have high conviction in many of the reforms?
A: In democracy there are various views, that is the beauty of democracy. But when we arrive at a decision, we implement the decision. Before that, there maybe divergent views. In a democracy, it is always there. In a growing society of this size and magnitude, one cannot expect that there will be any uniformity of thinking.
Q: Do you think you can convince all your fellow colleagues in the Congress to go ahead with the reforms at the pace at which you want to move ahead?
A: I am quite confident that I can convince my colleagues and all rational thinking persons on what is needed to be done for the larger interest of the country.
Q: You have many fans in the global Indian fraternity, NRIs particularly, because when you did your Budget in 1983-1984 you did many things for them and they still remember that. Does that same view exists today in your view of inflow of foreign capital into this country? Are you as liberal?
A: Of course, there have been substantial contributions. Even before my 1983 Budget, I practically implemented the entire RN Malhotra Committee Report who was the Secretary for Economic Affairs and later on became the Governor of Reserve Bank of India. Subsequently, Dr Manmohan Singh in his Budget in the early 1990s implemented it to a great extent.
Q: You still have that liberal view of foreign capital inflows into this country?
A: Of course, we have views. A new ministry has been created and I do hope they will participate more and more proactively in the development of this country.
Q: So, one should say that you are pro-Foreign Direct Investment in this country?
A: I am not interested in epithet, I am interested in action.
Q: But is the Congress Party pro-foreign investment?
A: I am telling you that whatever we have done we have done as Congressmen. What I did in 1983 as the Congress Finance Minister. What Dr Singh has done in early ‘90s is as the Congress Finance Minister.
Q: I am not suggesting that, I am only saying that the Congress Party wanted to do things like FDI and insurance, aviation but the Left party did not allow it. But is the Congress Party pro those policies without the Left now?
A: Read the Congress manifesto and you will come to know.
Q: Why don’t you say it, the manifesto was written by your Party, you can at least say that much?
A: That is also drafted by the Congressmen and what we have done for the last five years is under the leadership of the Congress Prime Minister.
Q: So, you are pro-FDI?
A: Conclusion is yours, conclusion is not mine.
Q: Would you concede that there are serious systemic flaws in the system like oil pricing etc which you need to look at hard and close as a Finance Minister?
A: Let me see. I will have to look at various aspects, various issues not merely on the oil sector but other important growing sectors.
Q: Because it’s a very sensitive issue for the kind of subsidies that you are carrying in the Budget. It is probably the most important issue. Would you try and resurrect that in the current Budget?
A: What will be done in the form of a Budget proposal will be known only when the proposal is made.
Q: I am not asking for the fine print, I am saying will you address it?
A: I am not talking giving any hint. So, what is to be done at the Budget proposal will be presented at the time of the presentation of Budget. What I can assure you is that whatever is needed for the betterment of the economy as per of our assessment and judgement will be done?
Q: Is your thrust going to be on social schemes and employment generation because you started the interview by saying “whatever needs to be done for the poor of the country and the common man is prime focus.” Do you think whatever reforms and whatever policy you want to do is that going to be the core thrust?
A: Of course, the common man is to be the focus; aam admi is to be at the focal point. Why did we say in our manifesto that from the experiences which we gathered on the implementation of the National Employment Guarantee Act, we will improve it further. Why did we say that the minimum wage will be increased to Rs 100 because aam admi is the focus. Why are we talking that employment guarantee has been ensured by enacting a law. These are the issues which are to get top priority.
Q: You have spoken about growth picking up in India from October onwards or in the second half of the fiscal year. What are you predicating or basing that hypothesis on? Is it hope or is there conviction in that?
A: I am hoping so and some indication are available. The type of deteriorating situation which was prevailing in the second half of the last year has started to abate. Inflows from April and May have started picking up slowly but steadily. Yes, manufacturing sector is not doing well, but I presume the growth projection for the year 2008-09 will be nearer to the assessment made by the CSO (Central Statistical Organisation) of around 7%. It maybe little less but it will be around that. Therefore, I am hoping that if something drastic does not happen in the intervening period, things may start to pick up from October. I mentioned October because by that time the prediction of monsoon will be known and also what type of monsoon we will have.
Q: Any thoughts on Bharti-MTN deal which got inked yesterday. Do you have any thoughts as the Finance Minister on such a big cross border deal?
A: It’s a welcome move. I must say I welcome this move. It has added a new dimension to our South-South Cooperation and we wish them all success.
Q: We will have a Budget from you in the first week of July and will see a conservative Pranab Mukherjee or an aggressive Pranab Mukherjee with his first Budget?
A: Let us see at that point of time.
Q: A simple adjective for yourself. I am asking you to describe the country?
A: As I told you that neither I believe in adjective or epithet. I just want there should be objective assessment of somebody’s work.
Q: You have an opportunity of crafting a Dream Budget? Will you craft a Dream Budget this time?
A: Lets see whether it is a Dream Budget or not. I am not interested in adjectives. I am interested in doing the correct things at correct point of time.
Source : MoneyControl
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