Rating agencies were not a factor at all in our decisions: Shaktikanta Das

Interview with Economic Affairs Secretary

After helping frame a Union Budget for the last time, Shaktikanta Das, economic affairs secretary, spoke at length on a number of issues to Arup Roychoudhury & Indivjal Dhasmana. Edited excerpts:

The Chief Statistician's advance estimates, released last month, did not account for demonetisation. Did you base your revised 2016-17 estimates and 2017-18 budgeted estimates on that or did you account for the note ban to provide a clearer picture?
The Central Statistics Office's (CSO's) earlier nominal Gross Domestic Product (GDP) growth for 2016-17 was 11.5 per cent. We have assumed nominal GDP growth at 11 per cent. For next year (2017-18, starting April 1), we have assumed 11.75 per cent. Therefore, it is not an adoption of what the CSO said. Their numbers for the current year will come around February 7. We will see their estimation. When we set out to estimate for the Budget, we had the CSO's numbers, the benefit of the Economic Curvey and then we had internal meetings and took a considered call. We were more realistic about the impact of demonetisation.

So, based on how the Budget makers have assessed demonetisation, how will that affect tax proceeds for this financial year and the next?
For 2017-18, we see indirect tax growth of nine per cent year-on-year and direct tax growth of 15.4 per cent. That does not factor in the data on cash deposits under the Pradhan Mantri Garib Kalyan Yojana. That is still ongoing and we don't know the final figures. Income tax and indirect tax collections are better this year. We could see a realistic, possible upside.

You will be the last economic affairs secretary to head the Foreign Investment Promotion Board. What is the road map for its replacement?
A decision has been taken to abolish FIPB during 2017-18. The map for its abolition and an alternative mechanism will be spelt out in the next couple of months. As long as certain sectors require government approval, somebody has to give it. In a sector which has a regulatory body, it could be the regulator clearing the proposal, in some cases the ministry. We are working that out.

Could you elaborate on the proposals regarding political funding and the proposed electoral bonds?
Electoral bonds will provide anonymity to the donor, which will not lead to misuse and money laundering. These have to be purchased through cheque or digital means. That bond acquires value when it is deposited into a declared bank account by a political party. The concern is that the bond might change hands but that does not matter. You can change hands but the value is only realised when these are deposited and anonymity is anyways maintained. These are bearer bonds; face value is the final value. These can't be traded and carry no interest.

What about the worry that if the Reserve Bank and banks have the details of those purchasing these, the party forming the central government could also access that data?
Under the banking laws, there is secrecy. Just because we ask for the list of depositors, the banks are not going to give it. You have to ask for that information under a certain law. Say, if the enforcement directorate is investigating a case of money laundering, it can write to the banks and get details of particular transactions of the person being investigated. Otherwise, getting such details will be violative of the banking secrecy laws.

The finance minister's Budget speech gave a clear intention of merging state-owned companies and gave the example of a proposed oil behemoth to take on global giants. When can we expect something on that?
The proposed oil major should be happening very soon. It is almost finalised. Then, other sectors will follow. I cannot give all details but it does not mean all oil companies will be merged. Such moves will help disinvestment proceeds, of course. If company A buys shares of company B from the government, the money will come to the government. But, we have not taken into consideration the possible merger and acquisition proceeds as part of the total 2017-18 disinvestment target of Rs 72,500 crore. We have taken into consideration the listing of state-owned general insurance companies and the railway companies, which the minister announced.

When will we see the FRBM (fiscal law) panel report being made public? A number of reports have not been made public in the recent past.

We are examining the recommendations of the FRBM panel. We will have to see what we can accept. In some reports, certain recommendations lead to a lot of speculation you put it in the public domain. People think as if these measures are already taking place. If you put it in the public domain, it is perceived as a government report and the Centre's decision. That is why some reports have not been made public.

The fiscal deficit target of 3.2 per cent of GDP for the coming year -- is that a balancing act between spending more and keeping the rating agencies happy?

The view of the rating agencies is not a factor which influences our decision. The government will do what is good for our economy and fiscal position. We will not take a decision just because I want a Standard and Poor's to increase my ratings by a fraction. That is not a consideration for any decision at all.

Government's decision-making requires fiscal prudence on the one hand and some additional spending in infrastructure and other asset creating sectors. When we worked on this, we found we needed to spend some extra money this time on things like affordable housing. The FRBM panel has recommended a fiscal deficit of three per cent for three years starting 2017-18. Next year, we are at 3.2, which we will do our best to improve upon, and from the year after that, we will hope to see a target of three per cent.

(Global) Rating agencies have anyway not upgraded us for a number of years. For the past seven-eight years, which country has had a better reforms track record and fundamentals? You (rating agencies) still say we have not done this or that -- so, thank you very much. We now find it strange.