Finance minister Nirmala Sitharaman says learnings from the experiences of 2009-13 have prompted the government to be responsible while announcing the ₹20 lakh crore stimulus package and not splurge. In an interview with Deepshikha Sikarwar and Vinay Pandey, Sitharaman says boxing the measures unveiled as supply-side would not be right as the government has done a mix and match, including putting money directly into people’s hands by increasing the allocation towards the rural employment guarantee scheme. Edited excerpts
The entire package has big-ticket reforms and means to address the supply side. Businesses say even if they open, there is not much demand …
When banks are giving additional term loans or working capital, what are they going for? They are actually going for pending wage payments, procurement of raw materials, electricity bills which are due — all these fixed charges. And, then when they start buying raw materials, they start the production process, it will start the economic activity in a little way for each resource. What does this entail? That money obviously is being spent for the initial starting exercise because it’s a restarting process. And, that is actually going to generate demand, that is actually going to put money in the hands of people who will in turn spend. So, strictly supply-side measures also have a demand-side component. And the ripple effect is something that will touch at the ground level, so many segments of society. So, strictly boxing it and saying it’s supply side and you have not done anything for the demand side is not right.
We have had a mix and match. The increase in MGNREGA (allocation) is directly putting money in people’s hands.
You said we are not splurging; we are being responsible. Were you trying to avoid a repeat of what happened after the 2008 stimulus?
Mostly I would say coming from the learnings, based on the experiences of 2008-13. That’s one of the reasons why we have taken this course. Also, we looked at various countries’ responses. They have looked at tax deferment and also immediate cash outgo from the government. So, everyone has done a basket which consists of some proportion of this and some other proportion of that, and a very small proportion of the third and so on. So, it’s a mix and match of various things, each according to the state’s availability.
There is no specific intervention for more stressed sectors like hotels, airlines…
The way in which we have given out the package, when we deal with banks extending assistance to businesses, in our understanding it certainly covers or touches most sectors. This, of course, is on the assumption that nobody has put 100% their money to start a business. It’s their money plus some kind of borrowing. Somewhere every sector, even though I have not named each one, will be touched by what the banks are being able to extend without additional collateral. So, in a way that formula, that I am not going to ask you to give more to get a little more assistance, is designed with everybody in mind. Therefore, sectors will benefit from what we are doing.
Economists say the size of the stimulus in the package is about 1% of GDP. Industry was asking for as much as 10% as direct fiscal stimulus. Did we consider monetisation of deficit to give a bigger stimulus?
I would want you all to see first where the money is going. Isn’t that important, isn’t that the first thing? This is public money. You think we are not going to at some point in time tell what we have done, how it will be mobilised, where we will spend and so on? But at this stage, wouldn’t it be more appropriate for us to see where this money is going to? Whose business is getting revived? How many people are, therefore, being re-employed? So, these are all very relevant questions that you are asking me. But I would think that some of them have to be answered only as we go along. I can’t really today say yes this is it, as though this is the end of the story. And, second, do you now only want to focus all your attention on that rather than see where it’s going? It is important for us to monitor its implementation at the earliest without faltering and making sure all the targeted audience is reached.
Many economists said we could consider monetisation of the debt. Is that something which is there on the table?
We have heard, reviewed, assessed and discussed at various steps… finance ministry, PMO and with industry, not just us. Every suggestion which we get — sometimes in videoconference with industry, with captains of industry, with economists, with associations and so on — has honestly been gone through. I have spent time with my secretaries on a daily basis. So yes, as much as you are saying even I can say some economists have said this; some have said something else. All of which are very good, considered options. And, having gone through all that, we have taken this call.
At the social level, there is a very large stressed population in terms of informal workers, migrant labourers. Should there be more direct support to them because right now the lockdown is still in place?
I wish we had enough data to assess that and be able to assign something to them. The motive is not to exclude. Tell me (does) anybody — state governments, the Central government, local bodies, universities, think tanks, institutions which monitor our economy — have a comprehensive database on migrant workers? I am not blaming anybody. For me to say, that is the prototype, that is the state where this many migrants are there, they spend across the state, they may be from xyz sectors and if that’s the proportion, I might be able to do a model of xyz or abc states. And numbers, at least approximate numbers, and their spread and their instrumentality through which I can reach them. Jan Dhan account for instance. Because I had Jan Dhan account and because it was Aadhaar-seeded, most of the times, at least 99% of the times, I would be able to make sure money will go into their accounts.
Now if I had a rough surety that many of the migrant workers are also covered by this, yes get it. But where is it, where is the data, who is there as a migrant? Without that however much relief and however much you want to give, I don’t even have a basis and won’t know how to reach them, institutionally.
And therefore, it’s a problem which all of us equally intensely feel about. And, I hope at least this would give us all, inclusive of local bodies, to at least maintain some data. We understand money they need, food they need, health (facilities) they need, transportation they need…
Is there any thinking that the government will come out with some system or monitoring mechanism to create a registry?
I am honestly trying to see how best this can be addressed… sit down with the states, the labour ministry. This is one test that all of us, not just the central government, every state, will have to work on… because we can’t afford not to have this data.
The services sector has been wanting relief on GST. Was it considered as part of the package and is it still on the table?
I have not had a meeting of the GST Council subsequent to the February one. It is a question for them.
Will the Centre take it to the council?
Let me see.
People had a lot of hope with the PM mentioning the middle class in his address. The middle class feels it has been left out and there is nothing for them in the package…
Aren’t the MSME families middle class? The credit-linked subsidy scheme not addressed to the middle class?
The salaried class, which faced salary cuts, job losses, feels there’s nothing for us?
I’ll have to see how I can do it because today, every tax-related decision I take, you are well-aware has a bearing on the revenue of the Union government, but post that, through the devolution, affects the states, too. And, at a time when without me touching the tax, already revenue has come down for the government, states and the Centre. Yes, I have to attend to people who have lost jobs wages have come down, their profits have been lost. I need to know the depth of this problem. Not that I am unaware that it is going to have serious consequences. But, given my constraints, given my revenue generation issues and given the fact that it (tax concession) will also affect my devolution.
When the issue of constraints comes up, the answer we get is why is this government so scared of printing money?
That’s fine, as I said, good suggestions. Not one Nirmala Sitharaman, but everyone has applied their mind. We have collectively taken a call. Yes suggestions, we have taken all of them. We have, after that, taken a call.
Your budget assumptions, taken in February, now do not stand. So, if you look at the GDP growth and the size, people are expecting about 6-6.5% fiscal deficit. What is the government’s own assessment on this?
Consciously we have not made any assessment. As I said I have ten more months to go (in the fiscal year) and I don’t know what proportion, what extent to which this pandemic is going to retract or go away. Without me knowing for sure how long this pandemic is still going to challenge our economic activity, without that how do I make an assessment, even a guesstimate? On every count it’s unfair to ask me to make an assessment, whether it’s two months, ten months… the pandemic has not retreated, economic activity has yet to start because of the lockdown, (even) with all the waivers on.
How soon do we expect the measures playing out and aiding economic activity?
I don’t have a time frame, and the fact that I don’t have a time frame also influences my decision-making on my borrowing, on the stimulus, on the kind of money that I’m extending. I have to be prepared. And, God forbid, we don’t want anything. Not just this pandemic, any pandemic, ever touching India. We need to be prepared.
Given the length and uncertainty of this pandemic, is it likely that you could consider some more measures going forward?
As we go forward, we have to keep assessing. We have kept our mind open on this.
You said this is not the end of the story. So, is there a broad plan or scenario you have worked out?
We will go on assessing as we go on, that’s the thing.
On the guarantees, is there any assessment of how much percentage is likely to become a cost?
We did work on that. We did take the banks’ usual assessment of how many businesses fail in normal circumstances, but these are extraordinary circumstances. We did have that in focus. Banks, of course, have been exposed to major NPA crisis earlier. So, there are rough estimates which under normal circumstances banks can take. But as I said, keeping that in mind and also factoring in this extraordinary situation, we made some calculations about how businesses would fail; and a year afterwards, when actually the guarantee will be borne, what would be the kind of money that we have to put out. But no model will be 100% fool-proof, given the nature of the crisis. There is no particular number that I can quote because we do not know the nature of this crisis.
Source : PTI