‘Consistent policies, Centre-state synergy are important for growth‘

The gross domestic product growth of the second quarter (8.4%) positively surprised everyone. Do you think we will be able to keep this momentum up, and do you think this year could be better than many of us expected?

I like it to be better than many have expected it to be. All indicators are that it can be better. But the moment of caution for me would be how this new covid variant is going to develop. Although, at the moment, scientific evidence as much is available, gives us the feeling that while this one spreads too fast, it may not be all that worrisome. But you really cannot rely on any such information at this stage. That is why the Prime Minister reiterated the need to use masks and containment measures. The Centre has sent advisory to states to ensure protocols are followed. That sense of caution or element of uncertainty continues.

Have we managed to put the effects of the pandemic behind us at the macro-level and are we now on a steadier path of growth?

To a large extent, yes. There may be many heads on which you measure the performance of the economy. But largely, out of over 40 indicators, 22 are surely clear indicators of what is happening in the economy. Out of the 22, in 19 of them, we have achieved pre-pandemic levels or have crossed pre-pandemic levels. It means we are now much better than the pre-pandemic level in 19 of those 22 high frequency indicators.

About three of them have problems because of the nature of the sector. Tourism is one. It needs no explaining. The world is yet to completely get back to where it was in tourism sector. If 19 out of 22 high frequency indicators are showing that you have not just reached the pre-pandemic levels but have probably crossed it, and that in the last 10 months the kind of figures you are seeing, and the figures you are seeing in PMI of both services and of manufacturing, there is a consistency to this performance. Talking about having reached pre-pandemic levels is one thing, having crossed that level is the next and an even better indicator is that it is consistent. That consistency is not just for one or two months, but over several months. On growth, you can be sure. S&P only a few days ago said it has retained the growth figure of 9.5% for India this year—meaning the fastest growing economy this year. And we improve our numbers to the next year.

In October, the International Monetary Fund came out with a paper which estimated long-term economic growth potential of the Indian economy and said it was 6%. Is it a fair assessment?

I would think, that and a bit more, rather than just 6% or 7%. It can be a bit more of course. That will have to be enabled through several steps that the government has to keep taking. Together with consistent domestic polices, whether taxation or the ways in which we do business, and greater synergy between Centre and states, are going to be on top of the agenda for the federal mechanism to really feel the story as one. We have to brace for good, strong, and well-riveted growth and both the Centre and states must work together.

What steps will increase the capacity of the Indian industry to grow at a faster rate in the long term?

Compliance burden is to be reduced to the level of panchayats. The three-layered system being what it is, it is of no good if government of India tries to clean up or some states try to make it easier, it has to be consistently down to the level of panchayats.

Local bodies are actually the recipients of investments in a way and if decision-making is complicated, time consuming and burdensome at that level, it cannot help. Ease of doing business and reducing compliance burden is one of the things. Second, consistency in taxation. I go back to the example you gave about corporate tax cut. Hasn’t it shown even during the pandemic that it has brought in benefits?

You can see how industry is wanting to expand their capacities and invest in newer areas. That decision prior to the pandemic, nobody knew of the pandemic at that time, has actually come into play very well for our benefit. Besides, both direct taxes and indirect taxes should have a level of predictability. Frequent changes, complications or ‘ifs and buts’ can put off businesses—their planning can go for a toss. For the economy to have the benefit of better planned enterprises, we need to have these two absolutely on top of our agenda.

Will we be able to meet the disinvestment target this year?

We are progressing with each one of them. The Air India story itself will tell you that despite the pandemic, the extent of work that has happened and absolute transparency with which it got cleared, the same is the approach for dealing with the rest.

By when will the Air India disinvestment conclude?

The Dipam secretary has commented on it. Hasn’t he said that by 31 December, the handing over to the new buyer will happen?

You spoke about the importance of Centre-state relations. Over the last 20 months, there has been some fiscal tension between Centre and states. Are things better now?

I don’t think there is tension this year. In 2020, we did have discussions after discussions to make sure the formulation which is arrived at is acceptable to everybody (on GST compensation issue). After that the methodology through which the money has to be borrowed was also to be taken up and executed. I am glad to say that this year it ended off well. Everybody received the money as was promised, in time. This year, both the GST compensation and the devolution based on Finance Commission recommendations—tax amounts—have been devolved not just in time—but in both the cases—they have been frontloaded. That was to help states because infrastructure spending was clearly identified even in the (Union) budget as a key driver for the economy to get the right stimulus and revive. They have been given cash in hand, untied to anything. I do not see any major concerns regarding money not reaching states.

There have been reports about tweaking the GST rates and moving the slabs. Do you think it makes sense when GST collection is increasing and there seems to be stability in the whole process?

This was not a decision taken in the last meeting. It is was a decision taken quite some time ago probably two GST council meetings earlier. And even then, the consideration was, ‘let us not implement now.’ Now the intent is not to raise more revenue. These two particular steps you are referring to, the intent is not to raise revenue. The intent is to plug the quantum of refund which is going. We were paying more refunds, we were giving input tax credit refunds much more than the tax which is being collected in these two cases. So it was necessary at the earliest to correct this anomaly of duty inversion. If we did not correct, everything would have appeared normal, but GST council was going to go on paying without earning anything out of it. It does not make any sense. The anomaly was getting aggravated and needed correction. Even now, we said it well in advance (the tax rate rationalization in textiles sector) will be implemented from January. It is not getting implemented overnight.

What is your thinking on sovereign cryptocurrency and regulating private cryptocurrencies?

One luxury that the minister does not have is to answer questions of this nature when Parliament session is on. There is certainly a well-consulted bill which is coming through. Once the cabinet clears, it will certainly come into the parliament. On the floor of the house, with questions being asked by members, some answers were given, even there, I reminded members I may not be able to give details. They will have to wait for the Bill to come. I think that will be the answer I will be expected to give even outside of the House.

Is there a lot of speculation on cryptocurrencies?

Yes, there is a lot of speculation. That is not healthy at all.

Will there be adequate safeguards to ensure that people invested in cryptocurrencies do not burn their fingers in case these are regulated?

Parliament has to decide on it.

What can we expect from the Union Budget for FY23?

To some extent, the emphasis on infrastructure spending in some form or the other will continue.