With the clutch of reforms undertaken by the Narendra Modi government (easing of foreign investment regulations and use of Aadhaar platform for delivery of subsidies) and the ones that will be put in place soon...
By: Prasanta Sahu | New Delhi | Updated: August 17, 2016 9:49 AM
The finance minister has said in his Budget speech if more capital is required, he will provide it. Banks have the choice of getting out of their non-core businesses. (Source: PTI)
With the clutch of reforms undertaken by the Narendra Modi government (easing of foreign investment regulations and use of Aadhaar platform for delivery of subsidies) and the ones that will be put in place soon (like the goods & services tax and the bankruptcy code), the government strongly feels global rating agencies must consider improving their ratings and outlooks for the country. These agencies accord India the lowest investment grade. If they don’t factor in the recent spate of reforms, they will be missing out on the real India story, economic affairs secretary Shaktikanta Das tells Prasanta Sahu in an interview. Excerpts:
Will the monetary policy committee (MPC) be in place by September 4 (when RBI governor Raghuram Rajan’s term ends)?
There is a process involved (in the formation of MPC) and that is underway. It has nothing to do with departure of the current (RBI) governor or any such thing. The next (monetary policy) review is due only after two months. We expect that the next policy review will be done by the MPC.
Will a separate railway Budget be done away with from FY18?
The matter is under examination. Several operational aspects will have to be worked out (before putting an end to rail Budget and merging it with the general Budget). The government is yet to take a final decision. But, technically or legally, we don’t see any problem in merging the two budgets. Even today, the railway Budget is part of the annual financial statement attached to the general Budget and this is a constitutional requirement.
Don’t you think the rating agencies should review their India ratings, given the spate of reforms the government has undertaken and the growth forecasts?
We are very clear that international rating agencies should give due weight to India’s reform steps; they usually pay attention to such developments in the developed countries. I think they have to change their mindset and accept and recognise the measures we have taken on the reform front. Which country in the current context has taken as many reform measures as India has over the past year? No country has. If rating agencies don’t recognise these changes, they would indeed be missing out on the real India story. (Before the GST Bill was passed by Parliament recently, Fitch reaffirmed its BBB- rating for India).
The yield on G-secs has been declining. How much has the government saved in terms of interest cost?
We have not quantified the savings. What is important is coming close on the heels of Brexit and the steep volatility in the various global markets, this is reflective of investor confidence on the macro-economic story of India. The Budget has made an outlay of Rs 25,000 crore for public sector bank capitalisation in FY17, but the banks obviously need more.
Do you think these banks should try to monetise their non-core assets?
The finance minister has said in his Budget speech if more capital is required, he will provide it. Banks have the choice of getting out of their non-core businesses. They could also monetise various kinds of assets they are holding.
What is the progress on National Investment and Infrastructure Fund (NIIF)?
Our interactions with various investors have shown that their interest is more in specific sectors, not in investing in an all-purpose mother fund. Therefore, we are now restructuring and creating some avenues for translating that kind of interest into investments. To begin with, there could be two or three sectoral funds such as on roads and non-conventional energy.