The clock is ticking for the government: Jayant Sinha Sinha, minister of state for finance, says the Union budget was pro-poor as well as pro-business Remya Nair | Anil Padmanabhan
We have to create jobs, we have to create growth, and we have to generate the tax revenues so that we can help the poor, said Sinha. Photo: Ramesh Pathania/Mint
If it was only the second budget for finance minister Arun Jaitley, it was the first for his deputy Jayant Sinha. The junior finance minister is the Bharatiya Janata Party (BJP) member of Parliament (MP) from Hazaribagh, a constituency that had previously been represented by his father and former finance minister Yashwant Sinha. The younger Sinha, who describes himself on his Twitter handle @jayantsinha as a former venture capitalist, passionate about India, technology, tennis and cricket, spoke in a follow-up interview on the budget. In it, he dwelt on a range of issues, including the budget’s guiding philosophy—being pro-poor as well as pro-business. Edited excerpts: First you had the Rail Budget, then you had the Union Budget, and now you’ve had the rate cut. Things are falling into place with tremendous rapidity. How does the rate cut articulate it further? Through the various documents you have seen—the President’s address, the Rail Budget, the Economic Survey and the Union Budget—you will see a consistent approach both in terms of economic philosophy as well as in terms of our priorities. As far as economic philosophy is concerned, we believe in three very important principles. First, we believe in empowerment rather than economic entitlement. Second, we believe in minimum government, maximum governance, which means ease of doing business and less discretionary power for the state. Third, we do not see any distinction between being pro-business and pro-poor. In fact, we see that as a false trade-off. We believe that by following this economic philosophy that has been articulated by our Prime Minister also, we offer something distinctly different than other political parties in India. It is, in fact, the path to growth. Our priorities are also crystal clear. This is a government for the poor and dedicated to the poor. It is not just a political necessity to be able to provide opportunities, resources and a better life to the poor of India. This is our moral responsibility. We have to provide jobs for our young people and prosperity for our farmers. These are our three primary stakeholders. This budget that we have put together focuses on these three. We have got three other important stakeholders—middle-class taxpayers, businesses and investors. So we considered these six stakeholders while putting together this budget. We needed to frame a budget which was win-win for all these six stakeholders. I am happy that people are saying that this is a balanced budget and there is something for everyone. What is important is that in our first full budget, we have put the framework in place through which we are going to conduct our economic philosophy in the next few years. You will see that consistency, that predictability, as far as execution is concerned. Will the rate cut accelerate the process the government has put in place? It is very important for us to pursue sound fiscal policies and to demonstrate that our fiscal consolidation roadmap was quite prudent. We were clear that if we had to deviate from the 3.6% fiscal deficit, then the extra spending of 0.3% of GDP (gross domestic product), which is about Rs.37,500 crore, would go into high-return investments. The economy has been starved of investments in the last few years. And in particular, organizations like the Railways have been chronically underfunded and not been able to make investments that are very necessary. As a result of which, the Railways has a host of projects right on the shelf. This year itself, the railway minister has said that Rs.1 trillion will be invested in railway projects. This will give high economic and social returns and will have a terrific multiplier effect in the economy. It is an acceptable trade-off to spend a little bit more this year, which will be very pro-growth and at the same time funding projects that have been languishing for a long time and ensure that they get going. Some fiscal purists are arguing that since growth is going to pick up in the next fiscal year, it is better to follow a counter-cyclical approach. That depends on what you think about the growth rate. The CSO (Central Statistics Office) has come out and said growth is 7.4% and 8.4%, which is based on their own calculations. The reality is that when you look at the whole host of matrices—how fast are people making investments, what’s happening to earnings growth, what’s happening to purchase of automotive vehicles, electricity production—you will find that on the ground it is still a pretty slow sluggish economy. Banks have not been transmitting the rate cut to the final consumers. How will consumers benefit if banks do not pass it on? There you have to demonstrate some patience. We have a very competitive market as far as financial services are concerned. Sooner or later, one or two of the major banks will cut and everyone will have to follow suit if they have to protect their customer base. RBI (Reserve Bank of India) has in total cut rates by 50 basis points (bps). And with 50 bps having being done, we are quite sure that the transmission mechanism will start to work. (A basis point is one-hundredth of a percentage point.) The government will not prod state-run banks to cut rates? The banks have to pursue their own commercial logic and do what’s in their best commercial interest. Expanding on your economic philosophy of being pro-business and pro-poor, how do you see that going down within your own party? We have to create jobs, we have to create growth, and we have to generate the tax revenues so that we can help the poor. So the poor are our No. 1 priority, but how are we going to help them? We need to ensure that our businesses flourish for that. You have removed the either-or? There is no either-or. It is a false trade-off. Our opponents often talk about the fact that we are pro-corporate, pro-rich, which is wrong. We have raised taxes on the corporates this time. And the corporate tax reduction from 30% to 25% means that in effect we are either being revenue-neutral or slightly raising revenues from corporates because their effective tax rate is 23%. We are going to get rid of the exemptions. The government will provide a short compliance window for tax evaders in its black money bill. Given that you will waive off jail term for the offenders, is it not an amnesty scheme? The laws have to be introduced. They are in the process of being drafted. The way that it is going to work is that we are going to give people a cutoff. By this deadline, you have to disclose everything. If you don’t disclose by then, then you will have to face enforcement and investigation and so on. But that’s how it is everywhere. In the US, under Fatca (Foreign Account Tax Compliance Act), you have to disclose your foreign assets. It’s not an amnesty. Where will this money go? Will a separate fund be created? No, it will go into the consolidated fund of India. Then it will provide a big cushion to the government? VDIS (Voluntary Disclosure of Income Scheme) had netted a good amount for the government. Let’s see. Clearly, it will be very punitive and very harsh if you hold foreign assets and do not disclose. What is also happening is automatic information exchange with other countries. So if you have a bank account with the UK or the US, we can match that up and we will know. Why hasn’t the Aadhaar unique identity number been used to curb black money in real estate transactions? Right now, PAN (permanent account number) is the way that tracks people. We are at present working on a system to cross-tab PAN and Aadhaar. So that every PAN is linked to Aadhaar, and every Aadhaar is linked to a PAN. We are cross-seeding it. It is an ongoing process. It will happen. How will you do this in the light of the Supreme Court judgement that says the government can’t make Aadhaar mandatory? Sooner or later, everybody will have Aadhaar. The benefits of Aadhaar are such that everyone will want to have Aadhaar. If we can cover 90-95% of the people, it will be good. How will you incentivize credit and debit card use? Reducing cash transactions can help in curbing black money. As far as cash transactions are concerned, we are making it difficult to conduct such transactions. So people will have to use credit and debit cards for that. We are extending Jan Dhan through a variety of direct benefit programmes. Payment banks are coming into place. So we are making it very easy for you to transact in a cashless way. We are making it possible to do mobile banking as well. It will be easy to do digital transactions. We believe there was a fierce debate within the finance ministry on the recommendations of the Fourteenth Finance Commission. There are some who said not to go ahead with the recommendations and some who said you should go ahead. On every policy matter, there is always a good, well-reasoned debate which there should be. Only through such debates and an open and frank discussion we will be able to come up with the best solution. As far as the recommendations of the Fourteenth Finance Commission are concerned, it is in fact a radical overhaul of India’s fiscal architecture and there are a number of implementation concerns and issues that need to be resolved prior to doing that. There was a dissent note in the Fourteenth Finance Commission itself from professor Sen (Abhijit Sen). The significance and implications of this change are quite profound. Therefore, within the ministry of finance also, we had many rounds of discussions with the Prime Minister, the cabinet, etc., to see how to best implement the recommendations. There was really no question about accepting or not accepting it. We were determined to accept it because it fits in very well with our policy of cooperative federalism. We had already moved to restructure the Planning Commission. But nonetheless, we were all very worried about exactly how to implement it and what it would mean for a variety of central schemes that were dependent on the support that was now going away. What clinched it eventually? What clinched it eventually was very much the fact that it is very consistent with our views of cooperative federalism. We have always believed that states should be given the freedom to pursue their priorities. For instance, if the centre in its rigid centralized one-size-fits-all approach, is sending money to Gujarat for electrification, that hardly makes any sense when Gujarat is fully electrified. Many states have different priorities at different points of time. Certain states have priorities related to say flood management. But they really cannot use the resources because you have been asked to use the funds for irrigation or electrification. Many states also complain that because of the matching approach that the centre had, which said that we will give you funds and you contribute 50%, many states had to spend their precious resources to match the money from the centre. So for all those reasons, it was quite clear that this was the right way to do it. But what if states do not have the capacity to manage these funds? I think the truth of the matter is that states will take responsibility. We have to expect the best from them. There are many capable people in the states. If we give them resources, they will rise to the occasion. Also, the governments in the states are very accountable. People know about the fact that the states have got more resources. I am a representative of the people. I have been elected by them. I get calls from my voters saying “fix this, fix that”. And I know very well that the clock is ticking for the government. A year is almost over for us. We have got four years left. We have to go back to the electorate and face them. And if we haven’t delivered, they will choose someone else to come in and deliver. We are accountable. The NITI Aayog is going to work with the states to ensure that they have the best practices, they have the capability and they have the resources to manage these funds. As a politician, how do you see the federal polity five years from now because of this kind of economic empowerment? At least to our reckoning, what we have tried to do with GST (goods and services tax) that changes the taxing powers of the centre and the states and what we have done with the Fourteenth Finance Commission is we have tried to completely revamp the fiscal architecture of the Indian government. So it is as big a deal as 1991 because the manner in which the government functions in India is going to fundamentally change. It will require some work in certain states where the government is not doing its job or is not being able to deliver. Over time, it will lead to far better services and much more responsible governance for the people of India. Given the opposition that the insurance bill is facing in Parliament, how will the government manage to push through the constitution amendment bill for GST in parliament given that it requires a two-thirds majority? In GST, we have built consensus with states. It is the empowered committee of state finance ministers that is really running the show. Our hope is that support that exists for GST is very different from the politicization that has happened to the insurance bill. It is always uncertain. People that we thought were supporting the insurance bill spoke against the bill in Parliament. In fact, Shashi Tharoor, the lead speaker on the Congress’ side, spoke against the bill. He said “where you stand depends on where you sit”. I could say the same for the Congress. Why has the land bill become a political hot potato for the government? As far as the land bill is concerned, the Prime Minister and the finance minister have reiterated that the provisions are pro-farmer and pro-development. What we have done in this land acquisition Act is very simple. We have taken five more activities and put them under the bucket of public purpose and expanded it to 18 activities from 13 activities. It includes defence, rural infrastructure, affordable housing. It is very much in the interest of India and the farmers. We haven’t tinkered with the compensation. It is very unfortunate that parties are not in favour of it. The Prime Minister has said in Parliament that “we welcome all good suggestions and will happily incorporate it. But let’s work together”. Do you fear that this is a divisive issue with the opposition and it could derail your other agenda like GST, which you want to push through in this session? Of course, we fear it. Because we are the government of India. Because we are the government of all 1.25 billion people. We are trying to do what is best for everyone. So please don’t block it for narrow political purposes and for purposes of being obstructionists. You are just damaging India’s national interest. There may be issues where you can legitimately agree to disagree. But in this case, where we have clearly explained what the matter is, the opposition is unfortunate. The various social security schemes that you announced in the budget like the pension plan have a pay element in it. You have put in a clause that there should be a token payment. The idea is that there should be no freebie. But it is considered very politically incorrect to make the poor pay. The way we see it is that it is ennobling for people. It makes them feel that they are responsible for their lives. They are taking care of themselves and their families. They have security and they have earned their security. Our job is to provide the tool so that they can take charge of their lives. At the same time, we recognize that despite our best efforts, whether it is the old, infirm, ill or handicapped, there will still be sections of society that need complete cover from the government. In the Jan Suraksha scheme also, we have created an opportunity for people who cannot pay the premium. The government will subsidize the premium. We have tremendous trust in the people our country that if you give them an opportunity, they will seize it. How much will these schemes cost the government? As far as Jan Suraksha is concerned, certain elements are at break-even in the sense that they are self-funding. The Jyoti Bima Yojana and the Suraksha Bima will not cost any money. The Atal Pension Yojana, depending on how many people become a part of it, will cost money because the government is going to provide a Rs.1,000 matching contribution for five years to get you started. The Jan Dhan Yojana will also cost money, but this we are getting out of various unclaimed deposits. We are trying to do this in a way that is fiscally also prudent and responsible.
