Anyone can start business in any sector, compete with PSEs in the strategic ones: FM Nirmala Sitharaman

NEW DELHI: Five consecutive press conferences did not seem to have slowed down the finance minister as he spoke at length about the stimulus of Rs 20 lakh crore to counter the pandemic and refutes criticism that the government should have opted for more cash support for the poor. Excerpts from a conversation with Rajeev Deshpande, Sidhartha and Surojit Gupta .

What happened in the last few months and what are the choices you considered for the package?

From the time the lockdown was announced, it was clear that the government had to come up with something fairly quickly — whether that could be comprehensive enough or not was the first challenge. That is why the initial package was purely on addressing issues facing the poor, marginalised, their requirement for foodgrains so that nobody goes hungry, there is some cash for them and also cooking gas. The PM Garib Kalyan package was immediate and for those who deserved it the most. After that, who did we not get an input from? Every section contacted the PM, the PMO, the FM, FMO and also every department concerned. You have chief ministers, finance ministers also approaching and saying ‘look we have an issue here’. Ministers were given charge of some states and even had to contact the district administration. The PM held large group meetings to hear from everybody. It was a complete thought through process.

There have been suggestions to provide direct cash assistance and you have talked about making a distinction between entitlement and empowerment. What was the thinking behind this?

To an extent, that was done in PM Garib Kalyan Yojna. We did Rs 500 per month and Rs 1,500. As I said, nothing is going to be adequate. But that was immediate relief with foodgrains lasting for three months and now up to five months. Having heard inputs from so many different segments, we thought it this way: What is that money giving in terms of the argument that demand has to be spurred. So my question as an answer to you is there is one way of doing it by putting money in the hands of the people? But demand spurring is also through various other ways. Now, when I give an SME additional term loans, additional working capital, yes I am giving through the bank, but he is going to spend it buying things. Is that not demand creation?

Then, we have also given packages through NBFCs, getting more money in their hands as institutions, MFIs. What is that money going for? They are going to lend and when you lend, what is it that is meant for? The fact is, money in people’s hands can be in several forms and what we have done is to give it through that route of creation of demand for businesses to get triggered.

Will these decisions be sufficient get the banks to lend because they have been very reluctant to do so and are parking money with RBI?

I can’t fault the banks. I have asked them and in one of the meetings I told them if indeed you are going to keep the money in reverse repo, you may as well give it to me. They (the banks) have come up with letters to prove that they have actually sanctioned these loans and businesses themselves said ‘the moment lockdown is lifted, we will take it’.

Politically and in terms of optics, do you think handing over money — as Azim Premji and others have suggested — would have served the purpose better?

It is also a question of what you believe in as a philosophy. You want to help the people. That is why I have given additional Rs 40,000 crore to MGNREGA. You want to do that but is it that way or any other way? I did explain the entire philosophy with which BJP, from Jan Sangh days and particularly Prime Minister Modi have clearly built. There is this phrase which says give a man a fish today, his hunger for today is sorted but teach him fishing and it takes care of him for life. I am not saying I am copying that.

How limited was the overall tax situation in the design of this package?

Naturally, that’s not a highly complex matter to understand. My revenues are coming down because of the lockdown and even before that there were just green shoots appearing, indicators were showing that businesses were improving and suddenly this happens. When we sat and planned for the package those factors played a role in designing the package.

Many sectors, such as airlines, are seeking a financial bailout. Tourism, hospitality are such sectors. Is that being considered?

Tourism also gets covered in some of the packages that I have announced. You can always go to the bank from where you get loans to run your business and ask for extra terms, extra working capital. It’s possible.

In bank loans, there is this three-month moratorium. Will this be extended?

I leave it to the RBI governor on that because he has responded quickly, whether LTRO and subsequently TLTRO and also making sure that he had conference with NBFCs to understand their problems and even this moratorium… he came up with it. So, I am sure he will assess the situation.

How do you compare the 2008 situation and now?

It has taught a lot to me and that is why I don’t mind crediting Congress... handling of the 2008 crisis by UPA government actually taught us a lot. Bank loans were one of the ways, giving liquidity and having made that so-called policy, they kept calling the banks and saying give it to Tom, Dick and Harry and several of them were their relatives who thought they need not return the money. So, at the end of the day, you had a notorious twin balance sheet problem. More so, they didn’t probably assess the progress, assess the health of the economy simultaneously… if they had, they could have stopped that window and restored some order for the banks. Many of the 2008 steps that they took to help the economy , they didn’t wind down and food inflation touched 10%. So, these are some of the examples of what you should not do as an FM.

Was the fear of a downgrade or an international backlash a restriction on package design?

It is interesting you are asking that because downgrade is always a relative thing. Even with that said, if India were to be the only one having the problem, the rest of the world ceteris paribus (other things being equal), I would have thought what will happen to India ’s sovereign ratings, what will happen to companies and their individual ratings and all that. The whole world is hit by , so the ratings agencies will obviously have to see each economy in relation to the other. If my macroeconomic fundamentals are better than many, many other economies, that would come into play. Credit goes to our farmers and many state governments who ensured that even with lockdown in place, Rabi crop came out. MSP reaching them in time is a big deal, the Centre passing the money on time, all this is happening. So in a way, where activity inevitably had to happen is happening. Obviously, with PM Modi’s approach of being a responsible leader... he doesn’t believe in quickly getting into something without assessing how the economy will bear the risk as a result of it.

What will be the strategic sectors? The government website mentions railways ...

Today, my announcement was that public sector companies will be present only in the notified sectors. And all sectors of the country will be available to the private sector. Even in notified sectors, I will reduce them (PSE) to four at most. Whenever possible, I will merge to scale. Where it is not possible, I will obviously privatize. But in all sectors, private players can also come. But at least one PSE will be there.

There is oil, energy, aviation, also banking ...

We will see, the notification will tell you. I don't want to go into that.

Do you also think about how public sector companies will be managed?

That is right. There is a need for PSEs to function in a more transparent and professional way. A classic example is that of ordnance factories. Its not easy. To corporatise is itself becoming so difficult to explain. It is to bring in transparency and better management. More operational efficiency, like a profit earning company. Many do an honest job, let me concede that. Many are good at performing. But the collective at the end of the day — why is it not matching companies that are run better.

So won't there be a sector, strategic or otherwise, where the private sector will be kept?

Yes, that is the story. Anyone in India can start a business in the sectors they want. In strategic sectors, it will compete with PSEs.

Are steps being taken to find relocating businesses?

Haven’t I announced? I have included it in the five announcements on mobile and electronics for which we have given money. This includes pharma and medical instruments. I have not even included money given for that. Electronics, chip manufacturing and mobiles, all of them got money.

How realistic is the possibility of companies trying to change China?

These are commercial decisions. We can create an environment that can be good, which is tax-friendly, business-friendly and create an ecosystem that can help businesses with the component suppliers, who are integrated in their value chains. So, we have to make an effort to see how best investments come. Simultaneously, we have to spend a lot of time in creating the ecosystem that is necessary for each one. For pharma, the kind of ecosystem is very different from what you would give a chip manufacturer. Ultimately, they all have one common bottomline — what is my profit margin? How much of a compliance burden do I have? Most importantly, what is the policy certainty? These are more critical issues on which you have to build confidence.

There is an exodus of migrants. They are trapped by uncertainties. You have announced measures for them, but at some point you will need them back. How will the situation be handled?

Whenever they want to come back, they will come back. Migrants belong to this country, they may have been born somewhere but they are somewhere else within the country. When they were working, we wanted them and each and every state benefited. A situation demanded that they remain where they are and be attended to. I know many companies which kept them and kept feeding them and kept giving them some money and I know of companies which even today are doing it. You have a lot of NGOs, which are helping out. But somewhere, at some point in time, they were scared — they were not sure about how long the lockdown will be in place and they will be hit by the virus. All of us are in this together. All of us are trying to help them and are trying to see how best it can be sorted out. It is a national issue, every state is trying to help, central government is trying but if we start saying ‘its everybody’s problem and not mine’ — that’s not showing responsibility at a time like this.

Have you linked state loans to reforms? Do you expect any reaction from the states?

I don’t expect that because these are not reforms which I am suggesting. They have been said by the Finance Commission and very many others.

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