Minister of state for finance, Jayant Sinha in an interview to CNBC-TV18, said the government has not only adhered to the fiscal deficit target, it has also increased public investment in a significant manner
Speaking about the Union Budget 2016, presented by Finance Minister Arun Jaitley on Monday, minister of state for finance Jayant Sinha said the thrust on rural economy is because of two consecutive draught years and not because of upcoming state elections.
“The urban economy is doing much better than the rural economy and in fact GDP growth of 7.6 percent is primarily on account of the urban economy. The Budget has tried to take steps to improve the rural economy,” he told CNBC-TV18.
Sinha also said the government has not only adhered to the fiscal deficit target, it has also increased public investment in a significant manner.
As far as PSU bank recapitalisation is concerned, there was an expectation that the government will provide atleast Rs 30,000-35,000 crore for the same. But the finance minister has instead provided for just Rs 25,000 crore in the Budget, and said the government is willing to provide much more. Sinha too said rather than the number, the market should look at the commitment made, which in effect says that the government is willing to provide more to PSU banks (more than Rs 25,000 crore).
On the topic of ‘bad bank’, he said that his government has never said anything about it. “We have in fact always said we will have a stressed asset fund than a bad bank,” Sinha clarified.
He also feels the GST Bill and Bankruptcy Bill will be passed in the second half of the Budget Session.
Below is the verbatim transcript of Jayant Sinha’s interview with Shereen Bhan on CNBC-TV18.
Q: Let me start by asking you about the area that the Budget has decided to focus on and which is the rural development area. The rural development allocation is at the tune of Rs 87,765 crore. And this clearly, seems to be an acknowledgement, a] that the government’s intervention so far has not been adequate or appropriate and b] you have got elections coming up across state governments. So, with an eye on that, this has got the attention of the government.
A: I would say that that is in fact a mischaracterisation. What we are really responding to is that fact that we have had two drought years and of course, as a result of that we have had significant rural distress, farmer income has come down and because some 50-60 percent of India’s population is linked to agriculture, that has of course, depressed aggregate demand as well, and so, it is very important for us to ensure that the rural economy flourishes. It really is a big driver for so many other sectors of our economy as well such as tractors, it is for consumer goods, it is for housing, it is for steel and so on.
So, it is very important for us to ensure that the rural economy is doing well. If you actually look at the numbers and you look at the urban economy and urban consumption, those have remained strong, in fact if gross domestic product (GDP) has been 7.6 percent; it is because the urban economy is doing well. So, we need to make sure the rural economy does well also. So, that was one very important priority, we have fully delivered on that.
Second very important priority was public investment. And if you look at the numbers in public investment, those have gone up dramatically. Rural roads, irrigation, highways, railways, you add this up, it is an astonishing number. Just simply in roads and railways, we have gone to Rs 218,000 crore of public investment going in. So, that was the second very important priority.
Third very important priority was obviously prudent fiscal management which we have demonstrated with the 3.5 percent fiscal deficit. But more than that, if you go back and look at what we are doing in this current year as well, in the current year, whatever we said in terms of the numbers that we wanted to achieve as far as actual expenditure is concerned, we have achieved that and in fact we have exceeded that. In past years, by and large, if you said you were going to do a 100, you pretty much did 80 or 90 of expenditure. So, there were big cut backs towards the end of the year which actually hurt aggregate demand, so we have stayed away from that. So, very accurate fiscal management, obviously, the fiscal deficit, quality of fiscal management, quality of expenditure also has gone up. So, that was the third priority.
Fourth priority was to ensure that a number of sectors, financial sector, gas, transport, the deep structural reforms that were required there to put those in place as well.
Q: The one big disappointment let me address that and that is as far as the bank recapitalisation number is concerned. Rs 25,000 crore and I know the Finance Minister has said we will provide more if needed. The expectation was at least Rs 30,000-35,000 crore. Why have you decided to hold back and how much more can we expect?
A: I think in the markets everybody gets fixated on a number. It is really not that important to worry about the number. What is important is the commitment and not the number. The commitment is that we will provide the banks whatever is required. The first tranche, the front loading is Rs 25,000 crore, whatever else is required thereafter we will provide that as well. You have to understand one very important factor that is changing which we have announced; the bank board bureau has been established. Vinod Rai is going to be the chairman of that, very experienced senior official. He has been banking secretary and is going to be supported by a really outstanding group of people. We have also said that there will be a consolidation of the public sector banks.
Q: That has been said in the past as well, not by you but by the previous government. So, can we expect a roadmap as far as this consolidation process is concerned?
A: The roadmap is going to come from bank board bureau and until we know exactly what the roadmap for consolidation is, it is impossible to put a number on how much more money we should put in to the banks. The commitment is there and the commitment is rock solid and that is really what people should recognise. We also have a commitment to consolidation, we have shown that with IDBI where we have already begun the process of the transformation. We have said that we will drop below 51 percent as and when things evolve.
Let me remind you that we are going through three very important stages of that. This is what we had said in Indradhanush and before people are too disappointed and dejected and start getting in their usual irrational approach towards this, we have followed a deliberate measured approach. First we said we are going to change governance and management, we did that. Second thing we said was, we would attack the NPAs, we are doing that. This is all good news that we are dealing with the NPAs in the way we are.
The third part we said was, going to be consolidation, that is what is starting now.