Unleash animal spirits to put economy on recovery path: FM tells India Inc

Asks rating agencies to be mindful of relative spending spree of economies

Finance minister Nirmala Sitharaman on Saturday asked India Inc to exhibit their animal spirits to put Indian economy on a sustainable path of recovery, now that the Budget and the earlier government moves has given clarity on policies and tax rates. She also urged credit rating agencies to grade the economies in relative sense and not as silos.

"I have been waiting to see greater investments from the private sector post-the corporate tax rate cuts. Now that the policy is clear, tax rates have been brought down, policy consistency has been underlined and ease of doing business is still going further, I would like now to see private investors and private industry in India coming forward with the so called animal spirit to show that it is possible to pull India up and keep it high as one of the fastest growing economies," she said in her address on the occasion of the foundation day of All India Management Association (AIMA).

Assuring India Inc that the government will be spending on productive assets, Sitharaman also had a word of caution for rating agencies.

"We are spending and telling credit rating agencies that every country is going through this pandemic and every country has to spend to keep the stimulus going. So every country's rating will have to be in relative terms and not as a silo. Spending, borrowing are all in relative terms. We would want every institution to look at it with a sense of relative understanding and context," she said.

India enjoys the lowest investment grade from all the three global rating agencies -- Fitch Ratings, Moody's Investors Service and Standard & Poor's-- and any downgrade will make it junk.

The finance minister said the Budget addressed several issues which are so critical for India to have a clearer path in the next decade and also to give a sense of certainty for businesses that policies will remain predictable and therefore businesses can continue to remain in their core activities.

"That is why even in the disinvestment related issues we have just not behaved the way governments have behaved till now. We have clearly identified core sectors where bare minimum presence of government will be there. Rest will be allowed for public private partnership, or complete disinvestment," she said.

She said disinvestment has not been so successful and has not been enthusiastically received. "Businesses, industry and the economy needs clarity over what the government means when it says strategic disinvestment. Are you trying to give it to professionals to run it better or is the government going to dip more and more into taxpayers' money?," she said.

The finance minister said that it is here that she kept saying she was answerable for the taxpayers money being used more productively, more efficiently, and it should be spent on those sections of our population who need all the support.

"That is the welfare India that we can think of. But that does not mean that you should run institutions that you can't run professionally and put taxpayers' money into that. I want to have a meaningful, more purposeful way in which our taxpayers money is spent," she said.

She clarified that disinvestment or privatisation of units is not because the government wants them to close down. "We want them to be kept up and running. For an economy like ours has high demand for many of these products such as steel, coal or copper where public sector undertakings are there for decades now. The economy still needs all of those. We want these institutions to be run, run better, used better and productivity kept improving for several decades," the finance minister said.

The government finds more sense for these units to be run more efficiently through greater professional skills which are available outside the government.

"It is here that we have presented a policy driven disinvestment agenda in the Budget. I am sure that Indian business leaders, industry leaders will understand this and make best out of it. We need capacities to be ramped up. We need expansion. We need more production of very many such products which are so required for the economy.  It is now on your shoulders entirely," she exhorted the industry leaders.

Uday Kotak, managing director and CEO of Kotak Mahindra Bank, said the government has given signals that it is as much committed to the private sector as it is to the public sector.

However, he cautioned that as the government borrowing programme remains at an elevated level in the next financial year, long term interest rates should be kept at a reasonable range.

"I understand it is a challenging thing because you (Sitharaman) are managing different variables but I think stable tax rates and a reasonable range for long term interest rates will really help businesses and industry to take long term investment decisions," he said.