Speaking at the India Global Forum, India’s Finance Minister said India is well prepared both medically and financially to meet the expected third wave of Covid. She also hoped the uptrend in GST collections over the last eight months would be sustained and this would enable the government to push ahead with its infrastructure spending programme that is crucial for economic recovery.
The Indian government will push ahead with privatisation of public sector units (PSUs) this year not only to raise funds but also to inject efficiency into them.
Speaking at the India Global Forum, which hosted some of the world’s leading decision makers and intellectuals, Nirmala Sitharaman, India’s Minister for Finance and Corporate Affairs, said: “We will raise money, of course, but the disinvestment process is guided by the fact that many of the PSUs being privatised lacked the efficiency that characterises the private sector.”
Referring to the BJP’s election manifesto of 2014, she added: “Also, if you consider the Minimum Government, Maximum Governance credo, many of these companies are not core to the government’s business. Therefore, ideologically too, today’s India and its large young population is looking for opportunities which will be driven by greater efficiency. That is one of the reasons for the disinvestment.”
Elaborating further, she said: “We had announced our intention on privatisation even in the previous tenure of our government. But if you remember, there was a slowdown in the economy in 2019. So, naturally, conditions weren’t conducive for going ahead with disinvestment. Similarly, there was Covid last year. This year, with vaccination picking up, I hope to go ahead with the programme without any hesitation. I would say we’re on course (to meeting the disinvestment target).”
Sitharaman spoke at length about how technology had enabled better governance, especially during the pandemic. Asked how she would deal with any future crisis, not necessarily related to health, she said: “I have to use technology better, plug the loopholes, which we have started to do in GST. We have to be smarter in the way evasion can be contained. Tax avoidance will also have to be contained without making it difficult for honest taxpayers.”
Formalising the economy is on top of her agenda, she said, as there is still a large unorganised sector, which will have to be mainstreamed. “We have to make tax assessments easy. Without this, it will be difficult to encourage many small businesses to come on board. I will focus a lot of attention on this, going forward,” she informed.
Recounting the measures taken by the government to provide relief to the common man as well as Indian industry, the Finance Minister said: “When we decided to implement a national lockdown last year, livelihoods were a concern, but we were clear that saving lives was more important. The Prime Minister immediately announced the free distribution of cereals and pulses to all those who were eligible.”
An estimated 800 million people benefitted from this measure. They have got foodgrains free of cost for a full eight months.
“We also used the direct benefit transfer (DBT) facility that India had put in place a few years before. This was used to give them money for their living expenses. They were also given cooking gas and cooking medium (cooking oil), which provided them relief,” she added.
Coming to steps taken by the government to help Indian businesses deal with the lockdown-induced demand collapse, Sitharaman said: “We also provided businesses with fiscal relief and announced a moratorium on loan recoveries. We also came up with a very large sovereign guarantee for all Micro, small and medium enterprises (MSMEs), which ran to about $40 billion, so that they did not suffer for want of liquidity and could retain their employees. Such support was gradually extended to many more sections.”
Importantly, the government did not discriminate between sectors. All those businesses covered by the definition of MSMEs were given relief – wherein credit was advanced both for working capital and also for term loans.
To ensure easy disbursal of loans, banks were instructed not to ask any additional questions, or seek any additional security. “There was a certain formulation, based on which everyone who qualified was given such loans. The option to opt out of the scheme lay with the beneficiary; banks could not say they wouldn’t give loans. Then, the government also gave an interest subvention so that the full burden of interest payment would not fall on small businesses,” she said.
The finance minister reiterated that the government would push ahead with its planned expenditure on infrastructure to try and kick start India’s sputtering growth engine. “I clearly said in the Budget, I presented on February 1, that borrowings will not come in the way of spending because public expenditure of infrastructure is what will help us revive the economy. And sooner the economy revives, you will be able to generate more tax revenues, as a result of which you will be able to service borrowings better,” she said.
Replying to a question on whether she had adequate financial firepower to back her strategy of spending on infrastructure to create a virtuous cycle of jobs and growth, Sitharaman said: “Luckily for the central government, there was a bit of space when I looked at the debt-GDP ratio as a result of the careful management of government finances over the last five years. This gave me room to go in for some additional borrowing.
“Similarly, the provincial governments that had been managing their finances in such a way that they were allowed to borrow a bit more. Of course, I had to be very responsible about this and created a glide path to bring down the fiscal deficit, which has risen, in the near future,” she added.
Speaking about the importance of fintech, Sitharaman said: “We draw great satisfaction from using technology in reaching out to beneficiaries and also opening up technology for payments. India’s UPI has set records, which offers a basket of several payment options. That offers users a basket of payment options. It was one of the biggest enablers for people to buy and sell from their homes.”
With work from home (WFH) becoming the norm in some sectors, these payment portals both in the private sector and from the government were key enablers of economic activity during the lockdown. We now have a technology stack and products that other countries are keen on taking from India. Thus, fintech has helped India survive and, in some sectors, do very well. So, we will continue to capitalise on and leverage its power.
This and the Modi government’s financial inclusion programme enabled the government to reach out to the highest number of people during the pandemic, she added.
Asked how prepared India is for the third wave, the Finance Minister said: “We have paid great attention to improving the medical infrastructure, especially in Tier II and Tier III cities and not just in the large metropolises. God forbid, if there’s a third wave, we are well prepared from the perspective of medical infrastructure. The vaccination programme is also proceeding at a good pace. More than 4.5-5 million people are getting vaccinated every day. Given this, we will be able to keep most of the vulnerable population from the third wave.”
Coming to the more critical issue of money, she added: “We’ve really ramped up spending on infrastructure. But notwithstanding the pandemic, we’ve collected more than $14 billion per month of GST for eight successive months. I hope that will be sustained now that there’s no national-level lockdown. Economic activity is happening and it’s picking up pace. This robust revenue generation will help the government meet the challenge.”