The government is conscious of the intensity of the second one wave of Covid-19 and is assessing its full affect before coming out with further packages and interventions, Union Finance Minister Nirmala Sitharaman told Dilasha Seth, Shrimi Choudhury, and Nivedita Mookerji in an exclusive interview. Edited excerpts:
What is your initial assessment of the affect of the second one wave of the pandemic? RBI has revised its real growth estimates downwards by 100 basis points to 9.5 per cent.
The Finance Ministry’s assessment will take a bit longer considering the timings and uncertainties. RBI’s [growth] estimates are based on limited sectors, and I accept that. Our consultations are much more particular. Due to this fact, I would need more time to give an immediate answer to that. The exercise is still on. We are also receiving inputs from states for some sectors, which are varying. This, I think, is because the restrictions differed from one state to another based on the severity of Covid-19.
While the Budget did a lot for capex-led initiatives, the second one wave has hit rural India tough. What’s the government planning in the short term to mitigate the hardship of people provided the massive job loss? Is there any plan to give a boost to the delivery of money in the hands of people?
There are two things to it. We are conscious of the rapidity and intensity with which it (the virus) is spreading in urban and rural areas. Then again, it is challenging to supply infrastructure, which will redress the problem immediately. We are keenly watching how the rural areas are responding. Second, we have announced free food grain over and above what they’re entitled to for two more months. We have been releasing the money under the Kisan Saman Scheme. The Prime Minister himself has been telling us to make certain that the naughty and vulnerable don’t suffer. At this stage, I’m personally monitoring the demand coming afresh in the Mahatma Gandhi Rural Employment Warranty. We are also monitoring whether there is any fresh demand other than those for which we had made budgetary allocation.
Meantime, I have asked both public sector and private sector insurance companies to further beef up the speed of sanctioning the claims. The assembly on June 5 is expected to further ease and speed up processes for them.
Are you ruling out any direct transfer of money like final year?
I have not spent time on it. The Union Budget used to be prepared right through the pandemic… This time, we need to revive the economy. So it used to be a tailored Budget for the pandemic. The Budget implementation started from April 1. We are only in the third month. I want to make an assessment of that. My interactions with the industry and with states are happening now. Why would I wish to say anything without me having learnt everything in full?
In February, when you were presenting the Budget, things were a little different. In hindsight, would you have done things otherwise had you known that the second one wave would be this strong?
The Budget used to be prepared after the GDP had contracted 23 per cent. At that time, I did not realize what the GDP would be for the whole year. So, we did our estimates. We said, provided the contraction, how do we make the economy grow, specifically in the context of Covid-19, the health infrastructure, not just in a metropolitan town, but going down to the blocks. We prepared the Budget being conscious of it. Now, it would be unfair to say that the Ministry did not anticipate the intensity and so forth.
The Opposition has called the government ‘heartless’. Even the former Finance Minister has said this government has done nothing. Do you think that’s cynical?
I wouldn’t say it’s cynical. I am in a position to hear comments of any former minister on our government. I would definitely see what is being conveyed. We need to take comments from more than a few people, including economists, former bureaucrats and stakeholders of the system and all those who are affected. Each and every tragedy gives a message. I would think there may be an element of guilt, and it impacts the human brain; there is a feeling that I couldn’t help somebody who is suffering. And there is no way in which I wish to get up now and say how dare you tell me all this. I wouldn’t wish to do that. We are collectively in a tragic situation. For all of us, mutual handholding is your best option.
The Budget is still some months absent. Are you thinking of increasing the budgetary allocation for healthcare from a low single-digit?
The final Budget had stepped it up. But there are suggestions to make it 6 per cent or 10 per cent of the GDP, and these are absolutely normative goals we need to reach. But also look at the absorption, the base to which we need to pull that resource. Despite the fact that I give that, I have to also measure how much will also be totally soaked into the programme that you are taking a look at.
So, the nature and the template of increase in the health allocation must be such that it goes to the block level. So the normative being achieved inside 12 months would be very appealing for me to read out. But can the system take it? I would wish to to start with prove that what I’ve done or stated in the Budget is getting executed. I’ve been now very intently going through as to how this is getting implemented.
Why is the government not offering free vaccination across the country?
Since January 16, when we launched the vaccine drive, the government started distributing the vaccines procured through two manufacturers. And also gave to states to hand out free. It used to be smooth. The government final October negotiated the cost and gave emergency certification to the vaccine makers. Health being a state subject, they wanted it decentralised. That kept building up and that’s the reason why we have taken a call on a vaccination policy where 50 per cent is with the Centre (to redistribute), 25 per cent with states and another 25 per cent for the companies to sell to large hospitals.
Will that change now with states complaining approximately the process?
With such a lot of chief ministers writing, I am certain a call will be taken by the Centre.
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The Organic-e advance order of 300 million is a positive step by the government. Couldn’t this have been done earlier for one of the foreign vaccines?
That’s a valid question to ask. We paid Rs 4,500 crore to both these companies (Serum Institute and Bharat Biotech) early April for placing of orders for up to July…. Negotiations are going on with (foreign) companies and I am not going to name them. We’ve been talking to people asking them to get a hold of meaningful ways in which you’ll be able to increase the provide. We were busy with them since November but they had said they were not going to provide to India.
Is the Rs 35,000 crore, that used to be allocated for vaccine, enough for this year or will there be further allocation?
I said that even then that whether need be I’m willing to give more. The government’s systems will give it to vaccine makers as long as they’re ready to give me a utilisation certificate. I am not even hung up on it. I’m saying I will give it to the vaccine manufacturers without guarantees, take the payment in advance and give me the supplies. The moment you give me one lot of provide, I will come up with more. I’m conscious of the urgency of the situation. It’s going to go on as we negotiate with more suppliers coming in.
Any estimate of how much the allocation will go up by?
No. That’s difficult to say that at the present time.
The excise duty budget estimate for FY22 is lower than FY21. While the RE for excise duty for FY21 stood at Rs 3.61 trillion, that for FY22 is Rs 3.35 trillion. In reality, the actuals are even higher. Is the Centre contemplating excise duty discount in the current fiscal year?
I said this even right through the budget. Not just this, but on most elements, we’ve been very conservative.
In the Budget, you laid down an ambitious disinvestment plan which included privatizing two public sector banks but even so IDBI and two insurance companies too. Will the second one Covid-19 wave derail the privatisation plan in FY22?
On disinvestment, I’m not off course. I shall do everything that I’ve said in the Budget this year, which includes everything that used to be approved by the Cabinet already and announced in the Budget 2021-22, including Air India. It is not off course.
You had budgeted for Rs 1.75 trillion disinvestment this year. So will you achieve it?
I can try to succeed in it.
When do we see the poor bank come up and how?
We have not called it a poor bank. That’s because what gets popularly known as poor bank gets a sure characteristic approximately it. Now we have designed something very different. You’re carving out the NPAs and poor assets which are sitting in the bank for a sure number of years. Those are taken out first for which provisioning is already made, but provided to this holding company, which is an asset reconstruction company. And at that point itself they get a sure sum of money for which they made provisioning for. And post which, the ARC would work on it and AIIFs will come through bidding and take it. At that time, at whatever rate, this whole object formulates for itself, even then the banks will get something for themselves. So this formulation is more translucent, more parties can come in for the bidding and we see that there’s a large number of interest. So this is moving as per plan.
In the backdrop of slew of cesses on petrol and diesel, will the Centre be open to the idea of putting petrol and diesel products in GST?
Even at the time of constitutional amendment for GST, the government had very clearly spoken in the pre-Council empowered committee and everybody had agreed to have entry of petrol and diesel products at zero rating. That used to be the only object which used to be allowed at zero….
Talking of GST, many state FMs have raised this concern of how GIC (attorney general on implementation committee) and law committee took independent decisions without consulting the council. They have called it unconstitutional. Do you think these concerns are legal?
This used to be mentioned by the Punjab finance minister. He due to this fact sent us a letter. We live in a time when decisions should be taken abruptly. This provision of the GIC isn’t new. The GIC is not only with Delhi bureaucrats. There are officials from a group of states. Then they take political guidance. It isn’t a set of people guided by the finance minister sitting in the finance ministry. They’re officials who realize the intricacies of what’s developing. In case you are telling me that this is being held against the Council and power has been usurped, it’s very unlucky. It’s going to cripple the functioning of the GST, whether in case there’s a need for emergency decisions…. In reality, I used to be accused of running a talking shop at the Council assembly. Do you are expecting me to say — oh, sorry, you’ll be able to’t speak…. or no, I don’t consider you… or I don’t like your face. I thought consensus used to be important, find it irresistible is in Parliament.
In the context of the Group of Ministers (GoM) that used to be set up for GST, Congress has said the party isn’t represented. Your remark?
From when have they (Congress) disowned Maharashtra? Isn’t Ajit Pawar there? This is such a lot attention seeking syndrome by Congress. It’s all approximately my circle of relatives, my dynasty in that party…. This is actually politicising the GST Council which is a very good federal platform. I’m sorry, it’s hurting each and every one of us and those that speak approximately institutions must respect institutions.
There used to be a GoM assembly the day before today and it sort of feels no call used to be taken on vaccine taxation and that it’s back in the GST Council’s court. Is that right?
I don’t realize as the outline has not come to me yet. The GoM must submit its outline by June 8, after which we can come to a decision on the next Council assembly.
On a different subject, what are your thoughts on market indices touching new highs? Do you consider there’s a real disconnect between markets and the real economy? RBI has also talked approximately a bubble.
I think this can be a fact that the fundamentals of the economy are steady and doing mannered. Just before the second one wave, you saw how the indicators were. If it’s the PMI on goods or services and products, electricity consumption, FDI waft, foreign exchange reserves, the indicators have been sound. Essential being strong attracts investment. Whether market indicates that, it’s a sustainable investment. To think it’s a bubble, I’m not certain.
Are you thinking approximately monetization of the deficit?
I would not have anything on that at this point. I’m in touch with the regulators. But it’s not a binary or a bubble that I have to panic.
Your views on government measures related to economic offenders and getting them extradited?
The government has said the offenders would be brought back.
Is the government reviewing the IBC code to prevent errant promoters from taking keep an eye on of the companies which are in the resolution process?
Polite I think we’ve made our position very lucid. Our position is that promoters cannot come back through the back door. I’m glad that the courts have come out in strong make stronger of the legality and the legitimacy of the Act itself. We now have to be sure that it gets implemented at each and every stage in every case.
What would be your broad message to the naughty people of India or the middle class who are taking a look desperately for government intervention?
Polite, I think since the final year itself, we have shown that we are a responsive government. We are fully empathetic. But we also should be responsible enough to give a meaningful intervention.