 "Open to get more private sector talent for PSBs: Jayant Sinha")
The coming 2016-17 Union Budget will revolve around four broad themes, says Jayant Sinha, Union minister of state for finance. These are universal social security, agriculture, job creation and streamlining of taxation. He speaks on this and other issues with Arup Roychoudhury, Dilasha Seth and Indivjal Dhasmana. Edited excerpts:
Second quarter GDP growth was 7.4 per cent, up from seven per cent in the quarter before. What does that tell you about economic recovery and for the rest of the year?
There has been economic recovery but we right now do not have enough data points to call it a broad-based recovery. It has been a patchy one. We are dealing with two macro shocks and are dealing with a big stack of stalled projects that we are still working through. Toxic assets in the banks are a big overhang on the economy. We have also had a deficient monsoon for two years. It is not as if we only have tailwinds due to the oil price decline. We also have a significant number of headwinds to deal with. However, given the global economic circumstances, our economy growing at 7.4 per cent is very creditable.
You have to look at the deficient monsoon and the agricultural distress that occurred as a result. We have a real commodity meltdown across the globe and exports are weak. Every time the Indian economy has done over eight per cent (growth), generally it has been when exports are strong. When you have two major sectors, exports and agriculture, not doing so well, to really power beyond 7.5 per cent is a tall task.
There are three months left for Union Budget 2016-17. What are your aims and what will be the themes?
Our economic philosophy and thinking has been very clear. Even while the Budget is bring prepared, there are three or four major themes we are working on. This Budget will revolve around those themes. A major theme has been universal social security — what we are doing with Direct Benefits Transfer and how we are making sure that people get these benefits.
A second major theme is agriculture, an area where we can do much more. There are a number of programmes we are working on — Krishi Sinchai Yojana, farmer health cards, crop insurance schemes, among others. The third theme we are working on is job creation and associated with that are a variety of different programmes, including Skill India, Make in India, Start Up India and Mudra.
Another theme is all the work we are doing in streamlining and simplifying the tax structure. We are obviously thinking where we are going to be on tax exemptions and direct taxes. Let us see if the committee we have formed (set up under former Delhi high court judge RV Easwar) will have some suggestions by then that we can put into the Finance Bill. Financial sector reforms are another area we are doing work in.
What composition for the GST (Goods & Services Tax) Council are we looking at? There are a number of issues the Congress has raised. How close is the government to resolving some of these?
We are in consultation with opposition colleagues regarding GST. The Rajya Sabha committee worked through all these issues raised by the Congress. At that point, the Congress did have a dissent note. Apart from them, everyone else on the committee was quite happy with the constitutional amendment. As far as building consensus is concerned, the finance minister has done a masterful job.
On the GST Council, what we had proposed is two-thirds for the states and one-third for the Centre, and a three-fourth majority to pass a resolution, which effectively gives the Centre a veto. This itself was proposed by former finance minister P Chidambaram (of the Congress). Right now, we have a balance in the Council, which we think is a very good one, enabling both sides to then work towards resolution of any outstanding issues.
The government has fulfilled its commitment so far to boost spending, at a time when private sector investment is not picking up. For April-October (first seven months of the financial year), you spent Rs 1.43 lakh crore, 31 per cent more than the same period last year. However, given that for next year you will have an additional burden of one rank-one pension (Orop) and the 7th Pay Commission, will such a spurt in capital spending be a short-lived initiative?
We have modelled the extra expenditure burden for next year. We can continue to make public investments that are necessary. I reject the view that we might not be able to continue higher public spending in infrastructure next year. We do a lot of medium-term fiscal planning, so we have a lot of spreadsheets where we look at various parameters. We have run these numbers, having modelled in extra burden from Orop and the pay commission. We have a level of public investment we will like to maintain. It is not only about kick-starting the economy but building productive capacity.
Will the bank holding company come up in the second stage of financial sector reforms? What is the road map on that?
We will require legislative approval for a Bank Investment Company. We will also need to change some of our banks into corporations or companies. That might also require legislative action. There are a number of moving pieces that we have to work with.
Will the government again consider private talent for key state-owned bank appointments? So far, we have seen such appointments in only two banks.
We are matching the roles that are opening up and when we were matching these with the roles that were vacant, we found we did not have sufficiently good candidates, so we opened it to the private sector and we got people for those set of roles. There is now the next set of roles which will open up that we have to look at and see how we can fill those. It will be on a case by case basis. Last time, we had a lot of vacancies. Now, we have two people from the private sector running large (state) banks. In the future as well, we are absolutely open to get more private sector talent, either at senior levels or mid-levels.
You have to remember there is a Supreme Court injunction against private sector hiring unless done by public sector guidelines. You have to find a way to resolve the dilemma. The fact is that for many specialised roles like marketing and systems, we need to strengthen our public sector banks.
Has the government formed a committee to address the rise in non-performing assets (NPAs) in banks? After power, what are the sectors you are targeting?
We are looking at NPAs sector-wise. There is no committee as such but we are looking at separate important industries-iron and steel, aluminium, textiles. These are the four we have identified right now. We want to have sittings for each of these and and understand specifically where the stresses are. How are the banks dealing with it and what is it that we can do from a government's perspective to make it easier for these industries to cope with the challenges they have right now. There are other aspects; there is a lot of work happening on NPAs.
After the constitutional amendment on GST, what other legislative action can we expect from the government in this session of Parliament?
We are looking at introducing the bankruptcy law. Number three on our agenda is the legislative action required to form the Public Debt Management Agency and the Monetary Policy Committee. Apart from that, we are working on arbitration and conciliation laws. There is an ordinance being put on that and it will have important ramifications. We will also take steps towards the Negotiable Instruments and Benami Acts.
Second quarter GDP growth was 7.4 per cent, up from seven per cent in the quarter before. What does that tell you about economic recovery and for the rest of the year?
There has been economic recovery but we right now do not have enough data points to call it a broad-based recovery. It has been a patchy one. We are dealing with two macro shocks and are dealing with a big stack of stalled projects that we are still working through. Toxic assets in the banks are a big overhang on the economy. We have also had a deficient monsoon for two years. It is not as if we only have tailwinds due to the oil price decline. We also have a significant number of headwinds to deal with. However, given the global economic circumstances, our economy growing at 7.4 per cent is very creditable.
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I have spent a lifetime looking at data and I know people tend to look for trends and patterns in data. The reality is there is too little data right now, given essentially only two quarters of the economic cycle turning, to really tell a story about the economy. The numbers are good but I want to see a real trend before we can say the economy is really and seriously on an upswing. With two quarters gone by, we are looking at 7.5 per cent economic growth for the year.
You have to look at the deficient monsoon and the agricultural distress that occurred as a result. We have a real commodity meltdown across the globe and exports are weak. Every time the Indian economy has done over eight per cent (growth), generally it has been when exports are strong. When you have two major sectors, exports and agriculture, not doing so well, to really power beyond 7.5 per cent is a tall task.
There are three months left for Union Budget 2016-17. What are your aims and what will be the themes?
Our economic philosophy and thinking has been very clear. Even while the Budget is bring prepared, there are three or four major themes we are working on. This Budget will revolve around those themes. A major theme has been universal social security — what we are doing with Direct Benefits Transfer and how we are making sure that people get these benefits.
A second major theme is agriculture, an area where we can do much more. There are a number of programmes we are working on — Krishi Sinchai Yojana, farmer health cards, crop insurance schemes, among others. The third theme we are working on is job creation and associated with that are a variety of different programmes, including Skill India, Make in India, Start Up India and Mudra.
Another theme is all the work we are doing in streamlining and simplifying the tax structure. We are obviously thinking where we are going to be on tax exemptions and direct taxes. Let us see if the committee we have formed (set up under former Delhi high court judge RV Easwar) will have some suggestions by then that we can put into the Finance Bill. Financial sector reforms are another area we are doing work in.
What composition for the GST (Goods & Services Tax) Council are we looking at? There are a number of issues the Congress has raised. How close is the government to resolving some of these?
We are in consultation with opposition colleagues regarding GST. The Rajya Sabha committee worked through all these issues raised by the Congress. At that point, the Congress did have a dissent note. Apart from them, everyone else on the committee was quite happy with the constitutional amendment. As far as building consensus is concerned, the finance minister has done a masterful job.
On the GST Council, what we had proposed is two-thirds for the states and one-third for the Centre, and a three-fourth majority to pass a resolution, which effectively gives the Centre a veto. This itself was proposed by former finance minister P Chidambaram (of the Congress). Right now, we have a balance in the Council, which we think is a very good one, enabling both sides to then work towards resolution of any outstanding issues.
The government has fulfilled its commitment so far to boost spending, at a time when private sector investment is not picking up. For April-October (first seven months of the financial year), you spent Rs 1.43 lakh crore, 31 per cent more than the same period last year. However, given that for next year you will have an additional burden of one rank-one pension (Orop) and the 7th Pay Commission, will such a spurt in capital spending be a short-lived initiative?
We have modelled the extra expenditure burden for next year. We can continue to make public investments that are necessary. I reject the view that we might not be able to continue higher public spending in infrastructure next year. We do a lot of medium-term fiscal planning, so we have a lot of spreadsheets where we look at various parameters. We have run these numbers, having modelled in extra burden from Orop and the pay commission. We have a level of public investment we will like to maintain. It is not only about kick-starting the economy but building productive capacity.
Will the bank holding company come up in the second stage of financial sector reforms? What is the road map on that?
We will require legislative approval for a Bank Investment Company. We will also need to change some of our banks into corporations or companies. That might also require legislative action. There are a number of moving pieces that we have to work with.
Will the government again consider private talent for key state-owned bank appointments? So far, we have seen such appointments in only two banks.
We are matching the roles that are opening up and when we were matching these with the roles that were vacant, we found we did not have sufficiently good candidates, so we opened it to the private sector and we got people for those set of roles. There is now the next set of roles which will open up that we have to look at and see how we can fill those. It will be on a case by case basis. Last time, we had a lot of vacancies. Now, we have two people from the private sector running large (state) banks. In the future as well, we are absolutely open to get more private sector talent, either at senior levels or mid-levels.
You have to remember there is a Supreme Court injunction against private sector hiring unless done by public sector guidelines. You have to find a way to resolve the dilemma. The fact is that for many specialised roles like marketing and systems, we need to strengthen our public sector banks.
Has the government formed a committee to address the rise in non-performing assets (NPAs) in banks? After power, what are the sectors you are targeting?
We are looking at NPAs sector-wise. There is no committee as such but we are looking at separate important industries-iron and steel, aluminium, textiles. These are the four we have identified right now. We want to have sittings for each of these and and understand specifically where the stresses are. How are the banks dealing with it and what is it that we can do from a government's perspective to make it easier for these industries to cope with the challenges they have right now. There are other aspects; there is a lot of work happening on NPAs.
After the constitutional amendment on GST, what other legislative action can we expect from the government in this session of Parliament?
We are looking at introducing the bankruptcy law. Number three on our agenda is the legislative action required to form the Public Debt Management Agency and the Monetary Policy Committee. Apart from that, we are working on arbitration and conciliation laws. There is an ordinance being put on that and it will have important ramifications. We will also take steps towards the Negotiable Instruments and Benami Acts.