 "Bill for PPP dispute resolution in monsoon session: Shaktikanta Das")
Shaktikanta Das, secretary, economic affairs, says a selection committee to appoint the government’s nominees to the new Monetary Policy Committee will convene soon. In an interview with Dilasha Seth and Arup Roychoudhury, he also details what is next on implementation in the government’s reforms programme. Edited excerpts:
Last week was a good one, with announcement of the amendments to the Indo-Mauritius tax treaty and passage of the bankruptcy code. What more can we expect in the coming months?
The proposed FRBM (Fiscal Responsibility and Budget Management) committee is one of the Budget announcements that will be done in days. The focus now will be on implementation, especially in sectors like agriculture and the rural sector on which the biggest number depend.
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With that, the entire systemic vacuum in India with regard to resolution of companies in distress will be addressed. It will make the process of resolution time-bound and quicker’ in turn, this will bring in a lot of efficiency to the way our economy operates. Today, the resolution process takes years and revival doesn’t happen. After that, you go for liquidation and insolvency but by that time, the value is completely eroded. In sum, today, money gets stuck when a company gets sick. With the legislation, not only will there be time-bound resolution but also retrieval of whatever capital has gone into an entity. One can redeploy that capital back in the economy.
The other work is the public utility disputes resolution Bill, for public-private partnerships. We expect to have it ready in the monsoon session as well.
Another publication has quoted you as saying FIPB (Foreign Investment Promotion Board) could be phased out.
What I said was, we are looking at a situation where everything is process-driven, and the role of FIPB should become marginal. It is not abolition but through an automatic route. There are certain sensitive sectors, like defence and telecom, where FIPB is required.
On the FRBM committee, what is the rationale behind the finance minister’s announcement in the Budget? Also, there was a suggestion in ‘Transforming India’ (the official website) that only medium-term targets should be looked at.
The Budget is an annual exercise. The question is how to operationalise a medium-term target. Are you looking at an average of three years or five years? In any case, the FRBM committee is to look into all aspects; I am not ruling out anything. And, the committee could come up with the recommendation that the status quo is better. It is up to them; they will look at it comprehensively. It is more than 10 years that (the) FRBM (law) has been implemented, and there are significant gains at both the Centre and state levels because of it. We recognise it has played an important role.
Second, whether we can have a range on an annual basis, instead of a fixed number. Third, whether there can be synergy between credit expansion and contraction with fiscal expansion and contraction in the reverse gear. In the terms of reference, we will give them enough flexibility to review and come out with recommendations.
When are the credit ratings agencies coming for a meeting? How strong is the case for a (national) ratings upgrade?
The big ones will start coming next month. Our economy is in a very robust situation, compared to two or three years before. We were (then) below seven per cent (annual) growth. In the past two years, the country has crossed seven per cent growth; this year, we are looking at close to eight per cent, if we get a good monsoon. In terms of growth, we are far better off. Growth in the context of what is happening all around the world is also to be seen; in the global context, 7.6 per cent growth in 2015-16 is very robust.
All macroeconomic parameters are on track — growth, inflation, fiscal deficit and the current account deficit. In fact, we now have a situation of a current account balance coming up month after month. The government has presented a very forward looking and growth-oriented Budget. Major structural reforms are being carried out. The bankruptcy Bill has been passed and the Budget itself announced various other measures on FDI (foreign direct investment) reforms.
On structural reforms, many things are happening. Almost every country is talking in generalities here; we are talking in specifics. We have a list — these are the things we have done, these are the things we have to do. Among major reforms, GST (a national goods and services tax) is still pending. Once GST is passed in Parliament (it is held up in the Rajya Sabha), that’s it.
If that happens, what timeline of implementation are you looking at?
If it (constitutional amendment on GST) is passed in the monsoon session of Parliament, I’d expect GST to be implemented by April 1, 2017.
So, the rating agencies in June...
We feel very strongly that India’s ratings deserve to be upgraded, based on facts and circumstances. On ‘Ease of doing business’, too, we are improving significantly.
What about quasi derivatives like convertible debentures under the Mauritius tax treaty? What will be the treatment after the amendments?
CBDT (Central Board of Direct Taxes) will soon come out with a circular on this.
With passage of the Finance Bill, the stage is set for the Monetary Policy Committee (MPC). When can we see it happening?
As early as possible. There is a selection committee. It will be convened and the decisions will be taken from there on.
Could we expect formation of the MPC in the first half of the financial year?
Yes, I would think so.
The finance minister had announced the setting up of a Rs 20,000-crore long-term irrigation fund, under Nabard (the official institution for lending to the rural sector). Around Rs 12,000 crore has been provided by the government. What plans do you have to raise the remaining funds from the markets? Will we see tax-free bonds?
There will be no tax-free bonds this year; they distort the market. On the fund, discussions have been held between Nabard, department of financial services, department of economic affairs and the agriculture ministry, among others. Several rounds of discussion have been held and we will decide soon.
