After unveiling the keenly-watched Union Budget 2021 on Monday, Finance Minister Nirmala Sitharaman, in an exclusive interview to Network18 editor-in-chief Rahul Joshi, spoke at length about the government's "fine balance" in taking care of all classes while ensuring consumers are not burdened through taxes.
Edited excerpts from the interview:
Q: It has been a tough year for you, but I think you have every reason to smile today. The Sensex bounced 2,200 points. Did you really expect this, and how do you feel?
A: No, I still have not seen the kind of reactions that are coming, because after presenting the Budget, I have been moving from one meeting to another, meeting people and giving interviews to newspapers. So I have not followed developments, either in the markets or anywhere else.
I hope the intention of the two-three major points, which have come across in the Budget, is well understood and well received. If it is being received, I will be happy, because after all, we want the country to understand the intent of this government.
Q: You have presented this budget in the backdrop of a once-in-a-century pandemic and also with a highly aggressive neighbor; we saw aggression from China. What were you thinking about when you were framing this Budget?
A: One thing was clear. If I had more resources to give, I would have given it to the people as much as we could, but we haven’t had that kind of a comfort. We didn’t have it then, we don’t have it yet, we hope to have it soon.
Also, the fact that even during the pandemic the small amounts that we gave to some people, were partly also kept aside. And I don’t blame anybody for it, they were saved for probably rainy days because the uncertainty is such.
Giving money to people so that immediate demand push will happen and through that people will be expected to spend also had a question with it: Will they spend or will they keep it aside for a rainy day?
Also, spending will result in immediate demand increases – no doubt possibly if they spend – but will it be a meaningful trigger for a virtuous cycle to be triggered? Unless that spending happens in sectors where the (force) multiplier will work, there is no point in spending in areas where the multipliers are weak.
That is why we have taken this route of qualitative expenditure, capex through infrastructure building, capex for health so that you bring in such infrastructure and such facility for health and there take an approach of holistic health and then look at agriculture. That is why we have gone through this route. So that is one side of the story.
The other – I certainly didn’t want to fund this whole operation through taxation. By increasing tax, getting the money and then spending is not something which any of us even put on the table for consideration. So that is why I have made provision for large borrowings with the tax buoyancy kept at a very conservative level, and with disinvestment, asset monetisation and improved goods and services tax (GST) collection, I hope we will be looking at better ways of handling our finances.
Q: In many ways the Economy Survey was a harbinger of things to come. Your government is finally going for aggressive growth without so much worrying about what the fiscal hawks would say. For a government which has been fiscally prudent and conservative, do you think this is some kind of a U-turn or a turning point in the way you look at the future?
A: No, I don’t, because it is one thing to be conservative and fiscally prudent in normal times. Even now if you notice, when people kept telling, ‘print money, you have to spend’, and I also made a conscious statement that if I don’t spend now, I will only be postponing the growth and I have to spend. That is clearly a conscious statement that I made.
So, given the situation that we are in, a stimulus was absolutely necessary. Quality expenditure is what we were looking for and that is why when we have decided and when we have taken a call, I am sure that because of the way in which we have designed it and also monitoring the qualitative expenditure that we are planning, it will definitely give us that required multiplier for the economy. Once the economy is into that virtuous cycle, income generation, revenue generation and all of that will fall in place. So your fiscal prudence is still intact and that is why I have given you a glide path because I am confident that this year I might have gone that far but I can rein that back in.
Q: But 4.5 percent in 2025-2026 given that we were hovering between 3 and 3.5 percent in the last couple of years before the pandemic?
A: That is true but the pandemic and its impact is something which we will have to keep in mind for the duration it is going to take for it to come back to that kind of a buoyancy; for that level of growth. I cannot be overestimating the economy and I don’t think the economy is in a position to even heat or overheat - those fears are not at all there. Therefore, I have to give it a reasonable time and I didn’t grudge that.
Q: By now we know what the government thinks of rating agencies like Moody’s and Standard and Poor (S&P)...you know of them being noisy, opaque and biased, but do you feel that there could be a threat of a ratings downgrade and how does that bother you or if at all?
A: Let me put it this way - I don’t want to say I am not bothered. At the same time, I didn’t let it bother me because otherwise even during the pandemic a lot of people kept asking me: is the rating agency worry stopping you from spending? Now I am spending. So then or now, it is not that bother, but of course by giving a glide path, and by restraining too long like the way in 2008, it was left open and there was no closing the doors. As a result you had all the taper-tantrums and the economy was still going through a big difficulty. We have learnt lessons from that and therefore I am confident this will be appreciated by people who are discerning in these matters.