 "Jayant Sinha")
A day after Budget presentation, Minister of State for Finance Jayant Sinha says people will remember it for public spending, tax processes and social security schemes. He tells Dilasha Seth, Arup Roychoudhury and Indivjal Dhasmana that both the Rs 99,000 crore projected to come from telecom spectrum sale and Rs 56,500 crore from disinvestment and strategic sales are reasonable numbers. Edited excerpts:
Don’t you think this Budget has changed the script of narrative a bit?
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Yes and no. Certainly, the media narrative seems to have changed. However, the policy and priorities of the government have not really changed. If you go back to the (ruling party’s) election manifesto, to the Prime Minister’s speech in the central hall of Parliament, you will find that that this government is devoted to the poor. You read the President’s speeches or the Budget speeches and you will find that across all of these, there are very consistent themes.
What would be the top three themes that this Budget would be remembered for?
People will remember it for the impetus we have provided for public investment. I mean what we have done for irrigation, rural roads, national highways and the railways. Collectively, take the amount of money being put either through budgetary means and off-budgetary means — I include what we are doing with Nabard (the apex) rural bank and NIIF (infrastructure investment) and higher education financing. The amount of money we can pour into public investment has taken a quantum leap. That will transform the economy because we know that long-term growth, the productive capacity, are driven by the high multiplier in investments.
We are going to be providing substantial amount of money through Nabard, Rs 20,000 crore national irrigation fund, lakhs of crores through NIIF, and substantial amounts through the higher education financing agency — we are capitalising it with a Rs 1,000 crore, which means it has a debt capacity of Rs 10,000 crore.
What is the second theme?
It is around social security. Between what we have done through Jan-Dhan, Bima Jyoti Suraksha, the health cover we are putting together. This is the only way we can ultimately eradicate poverty. If we can identify each individual and understand what they are eligible for, we would be directly able to provide them — whether it is food, fertiliser, health cover, insurance, income support or scholarship support. We can directly target beneficiaries through a social security platform and we would be able to deliver that. This, of course, includes the Aadhaar part. And, everything we are doing on pensions. So, the social security architecture, the Aadhaar legalisation, and then we have massively been building out ATMs and a micro ATM network through the post offices.
The third one, which I think is also under-appreciated, is a tax process side. Historically, taxes have had four breakthroughs. The first was when P Chidambaram announced three personal income tax slabs of 10, 20 and 30 per cent in the Budget of 1997. The next was my father’s excise duty rates of eight, 16 and 24 per cent. The third major breakthrough has been GST (the proposed national goods and services tax), a bipartisan effort.
Post that, the next major breakthrough is not in terms of tax rates but in the manner in which taxes are collected, disputes are settled, and the taxpayer interface with tax authorities. We are fundamentally transforming that. It is going all online, we are settling disputes, we are providing compliance windows for foreign and domestic black money.
There is a big question mark that these will require a big implementation framework. Are we ready for that?
Yes, of course. The very fact that we are talking about these things and trying to put more substance behind them is because we are in implementation mode. We have been making public investments. The railways increased their investment from Rs 58,000 crore in the last year of the United Progressive Alliance government to Rs 1 lakh crore this year. Next year, it will go to Rs 1.21 lakh crore. We are in the implementation process. Roads, of course, we are doing and in gram sadak (rural roads), we have stepped it up. We are taking a quantum jump in irrigation this year.
Possible pitfalls?
Absolutely, around execution. Even this year, as we worked on ensuring that capital expenditure goes out of the door, funds go out the door and you raise spending, it is proven to be difficult because the execution capacity in the Indian state has never been strong. In the past decade, it has gone down further. It is like pushing on string sometimes, to get this execution happen.
The Budget talked about presumptive tax. It’s game-changing and will take on an entire tax lobby — chartered accountants, lawyers. Have you taken them on board?
We have had multiple rounds of discussions with stakeholders. The Easwar Committee is a stakeholder from all these different communities. I think everybody would like a better system. Our entire system is imperilled by a dysfunctional tax system.
Your Budget on the revenue side is critically dependent on disinvestment and telecom spectrum sale. These (amounts) account for roughly one per cent of gross domestic product. Do you think there is policy clarity on both fronts?
We don’t come out with these estimates without a great deal of diligence. Ultimately, if there is Rs 99,0000 crore that are to come from the spectrum side, it has been arrived at through intensive discussions with the department of telecom. There are some very detailed reasons as to why that number is quite reasonable.
Disinvestment?
The sum pegged is Rs 56,500 crore. We have a new approach to disinvestment and strategic disinvestment. To reflect that, we have renamed the department as the department of investment and public asset management, as we are taking a more expansive view.
Strategic disinvestment is something we have said we will do. We have announced through IDBI that we are moving forward with strategic disinvestment. There will be other candidates as well. We have in fact prepared a strategic disinvestment policy. Last year, we were determined to do it but because there was a windfall from the oil side, there was less pressure to get it done. This year, there is more pressure to get it done, so we are even more committed to making that happen.
On the regular disinvestment side, which is Rs 36,000 crore, to an extent it depends on the markets. But, we have a wide array of possibilities. We are also including asset recycling. We have a number of long-term investors who have indicated a great deal of interest in getting assets that are cash flow and yield generating. We can package them up, whether they are roads or power plants, and really deliver to them and free up capital.
Do you have an institutional structure outside the government system for this?
That is precisely why NIIF has been put together. NIIF is looking at these kinds of yield-oriented portfolio as well.
Are you looking at all public sector units, profit-making and loss-making, for disinvestment? Loss making includes Air India?
I think all central public sector enterprises are part of that.
Foreign direct investment in central public sector units up to 49 per cent would now not need FIPB (Foreign Investment Promotion Board) approval. Are we going to see more FDI partners in these enterprises that will be part of this strategic sale?
We will have to see what emerges in this.
For a moment, one gets this impression that you are doing discretionary tax changes to promote (the) Make in India (project) by raising basic customs duties in 10 items, reducing in five others. The danger is we are introducing protectionism in some way and in the name of Make in India, manufacturing can become less competitive.
The policy objective here is competitiveness, not protectionism. We want to ensure our domestic industries are globally competitive, capable of competing with the world’s best. What we found is that because of an inverted duty structure, because of certain actions that other countries have taken, that companies are at a competitive disadvantage relating to global trade. We have tried to address some of those issues, so that our companies can be globally competitive. Whenever we have done is based on thorough analysis of what our cost structure is and what we need to do to encourage domestic manufacturing and domestic job creation. So, the notion here is very much competitiveness and not protectionism.
Are you responding to chief economic advisor Arvind Subramanian’s last section of Chapter 1 of the Economic Survey, where he is concerned about protectionism, duty structure and minimum import prices?
There is a difference between theory and practice. Theory is to take a very purist view and say you should not touch anything at any time. The actual practice is, and steel is a very classic example, is that circumstances are such that adjustment becomes very difficult. The US is very much a free-trading country but even in there for a very long time, there were quotas, quantitative restrictions on how many cars can be actually imported from Japan.
There is only a passing reference to GST in the Budget. What does it indicate?
That does not indicate anything. GST is the top priority. The finance minister has said as soon as the Finance Bill is underway, we will immediately turn back to GST, in the second half of the Budget session. GST and the Bankruptcy Code are our topmost priority legislations, after the finance Bill. We have not spoken about GST in the Bill simply because we had a lot of subjects to cover and did not have time.
Is there any deadline, if GST would be introduced from April 2017 or in the middle of the next financial year?
It obviously depends on when the constitution amendment Bill is passed. We hope it would in the second half of the Budget session. If that happens, we will have to see how quickly the GST Bills (Centre and all states) would be passed. Our goal would be to get the Constitution amendment passed in the second half of this session. If that happens, we can implement GST either from January 1 or April 1, 2017. This is a flow tax and not a stock tax; so, it could be implemented from the middle of the year as well.
What subsidy reform lesson can you draw from this Budget? You’re spending around five per cent more on these?
Subsidies are mainly on fuel, food and fertiliser. Fuel has obviously come down. We are trying through DBT (direct transfer of subsidies) trials in fertiliser. On food subsidy, we are working on digital ration cards, biometric authentication and digitisation of fair price shops. Remember, we are working at a time of agrarian distress.
