Puncturing holes in the arguments of UPA-II government that coalition compulsions, disruptive opposition and global financial crisis have hampered India?s growth story, Yashwant Sinha, former finance minister, chairman of the Parliamentary Standing Committee on finance and senior BJP leader, says that inaction and lack of reforms have brought the country to the current economic situation. In an exclusive interview, Sinha tells FEs Bijay Shankar Patel and Ashish Sinha that the biggest challenge for UPA-II is to revive domestic demand.
As a former finance minister, what worries you seeing the current state of economy?
I am worried on a whole lot of issues. I am worried on account of inflation which is again showing signs of going up. Interest rates worry me because you cannot have disconnect between inflation and interest rates. I am hugely worried about government deficit which is 6%. The government of India has shown complete indiscipline compared to states. If the national fiscal deficit is under control, it is largely because of the state governments and not on account of the Centre. I am also worried about current account deficit (CAD). I had also said in Parliament that 70% of the CAD is financed by short-term debts. FIIs may stay or go but that will not have as much impact as the non-renewal or non-rolling over of the short-term debts. And then there are dark hints that the corporate India has to pay $120-130 billion in debts this year. All sectors have show deceleration and that is worrying me.
But aren’t the external factors also responsible for the current slowdown leading to the demand for easing of FDI norms across sectors?
That is what the government is saying. It is assigning all the blame to the euro zone crisis and rising petroleum prices, which have moderated now. Every one knows that Indian economy is not that well integrated with the global economy. And even not so much with the european economy. Anyone who understands India will say that its growth story is because of domestic savings and domestic demands. The external demands like exports and the external support like FDI, FII, etc, have played only a marginal role in the liberalised scenario that we are operating in now. In 2007-08, which is the best year in recent past, India?s domestic savings rate was around 36% and the total investments raised were 38%. This means only 2% came from abroad in the form of FDI, FII, NRI, etc. That is why I do not buy this theory that if FDI in retail is opened that India growth story will revive. It will not happen that way. Let us not put any excessive hopes in any FDIs. The challenge is to revive domestic demands and domestic investments. The biggest threats in doing that are inflation and high interest rates.
The government says its functioning is hampered by coalition politics, bad opposition, and worsening global economy? Do you agree?
I don?t buy that. What stops the government in building 20 kilometres of roads each day as per its own targets? It is not BJP which talked about 20 kilometres of roads. Who is preventing them from ensuring uninterrupted coal supplies to the power plants? Who is preventing them from making appointments in PSUs? Why it takes over a year to appoint a LIC chairman or NHAI chairman? How can one attempt to do any thing in these sectors without appointing heads in these sectors? Therefore, I said in Lok Sabha, when a government fails, it fails on all fronts. Which opposition is stopping the government in these works? Why did S&P said ?an unelected Prime Minister?? They have hit the nail on the head. This is the problem. Here is a PM who is a second or third rung leader in his own party without any political clout so he is unable to provide leadership.
How do you view the work of the PSC on finance?
I can claim with some satisfaction that we have submitted nine Bills which are now pending with the government. Normally, it is the case that nine Bills are pending with the standing committee and the government is waiting. This is quite the opposite now. We have returned nine Bills ? UIDAI Bill, banking Bill, insurance Bill, pension Bill, DTC, prevention of money laundering Bill, benami transaction (prohibition) Bill, companies Bill, and narcotics Bill. Only Bill which is pending is the GST Constitutional amendment Bill which I hope to give back during the Monsoon Session. So nobody can find fault with the committee or the working of parliamentary process.
Then where are the delays happening with regard of these Bills?
We submitted our recommendations on Companies Bill in the Monsoon Session, 2010. Then the government came back to Parliament in the Winter Session, 2011. Why were they sitting on this Bill? The other day Veerappa Moily said Opposition is opposing and named BJP. This is not true. Even UIDAI Bill has been pending for over a year. On Companies Bill, the government took 16 months to come back to Parliament. Therefore, as far as the economic legislations are concerned, the government has nobody to blame but itself.
What is the status of GST constitution amendment Bill?
We require only one or two more meetings on that. I hope to submit it in the Monsoon session itself. But it will not mean that GST will come into effect the next day as is the perception of a lot of informed corporates, industry bodies and even a section of the media. The government will require the consent of both houses of Parliament. Then it will need to be ratified by 50% of the state governments. It is still a long way to go.
What is your take on the Pension Bill and the recent flip-flops by the government?
If there is one piece of legislation which demonstrates the continued weakness of the government from the days of UPA-I, it is the Pension Bill. The Bill was drafted in our times. The pension reform was started in our time. We are committed to it. When it came in Parliament and was referred to the standing committee back then, I was a member. And I worked hard on it personally to evolve consensus on it. We submitted it in 2005. But the government sat over it till 2008 because of the opposition of the Left. It is only after their divorce with the Left in July 2008, they thought of bringing it back. They introduced it subsequently but it lapsed in 2009 with the dissolution of Lok Sabha. It was re-introduced and referred to the Standing Committee. We worked on it and returned it. For the record let me state that Pranab Mukherjee called a meeting with the BJP on this. We told him to accept our recommendations. The finance minister even sent his joint secretary to work with me draft the official amendments. Then Mamta Banerjee opposed it so they did not have the courage to take it through. Similarly, now the matter was listed on the Cabinet agenda but had to withdraw it as Trinamool opposed. Now what is the remedy of that? Why does government look for remedy from BJP? We have supported it, let government bring it to Parliament.
