The government is conscious of the intensity of the second wave of Covid-19 and is assessing its full impact before coming out with further packages and interventions, says FM Sitharaman
Union Finance Minister Nirmala Sitharaman. Illustration: Ajay Mohanty
The government is conscious of the intensity of the second wave of Covid-19 and is assessing its full impact before coming out with further packages and interventions, Union Finance Minister Nirmala Sitharaman told Dilasha Seth, Shrimi Choudhury, and Nivedita Mookerji in an exclusive interview. Edited excerpts:
What is your initial assessment of the impact of the second wave of the pandemic? RBI has revised its real growth estimates downwards by 100 basis points to 9.5 per cent.
The Finance Ministry’s assessment will take a bit longer considering the timings and uncertainties. RBI’s [growth] estimates are based on limited sectors, and I accept that. Our consultations are a lot more specific. Therefore, I would need more time to give a direct answer to that. The exercise is still on. We are also receiving inputs from states for some sectors, which are varying. This, I think, is because the restrictions differed from one state to another based on the severity of Covid-19.
While the Budget did a lot for capex-led initiatives, the second wave has hit rural India hard. What is the government planning in the short term to mitigate the hardship of people given the massive job loss? Is there any plan to beef up the delivery of money in the hands of people?
There are two things to it. We are conscious of the rapidity and intensity with which it (the virus) is spreading in urban and rural areas. However, it is challenging to provide infrastructure, which will redress the problem immediately. We are keenly watching how the rural areas are responding. Second, we have announced free food grain over and above what they are entitled to for two more months. We have been releasing the money under the Kisan Saman Scheme. The Prime Minister himself has been telling us to ensure that the poor and vulnerable don’t suffer. At this stage, I’m personally monitoring the demand coming afresh in the Mahatma Gandhi Rural Employment Guarantee. We are also monitoring if there is any fresh demand other than those for which we had made budgetary allocation.
Meanwhile, I have asked both public sector and private sector insurance companies to further enhance the speed of sanctioning the claims. The meeting on June 5 is expected to further ease and speed up processes for them.
Are you ruling out any direct transfer of money like last year?
I have not spent time on it. The Union Budget was prepared during the pandemic… This time, we have to revive the economy. So it was a tailor-made Budget for the pandemic. The Budget implementation started from April 1. We are only in the third month. I need to make an assessment of that. My interactions with the industry and with states are happening now. Why would I want to say anything without me having learnt everything in full?
In February, when you were presenting the Budget, things were a little different. In hindsight, would you have done things differently had you known that the second wave would be this strong?
The Budget was prepared after the GDP had contracted 23 per cent. At that time, I didn’t know what the GDP would be for the whole year. So, we did our estimates. We said, given the contraction, how do we make the economy grow, specifically in the context of Covid-19, the health infrastructure, not just in a metropolitan town, but going down to the blocks. We prepared the Budget being conscious of it. Now, it would be unfair to say that the Ministry did not anticipate the intensity and so on.
The Opposition has called the government ‘heartless’. Even the former Finance Minister has said this government has done nothing. Do you think that’s cynical?
I wouldn’t say it’s cynical. I am ready to hear comments of any former minister on our government. I would definitely see what is being conveyed. We have to take comments from various people, including economists, former bureaucrats and stakeholders of the system and all those who are affected. Every tragedy gives a message. I would think there is also an element of guilt, and it impacts the human mind; there’s a feeling that I couldn’t help somebody who is suffering. And there’s no way in which I want to stand up now and say how dare you tell me all this. I wouldn’t want to do that. We are collectively in a tragic situation. For all of us, mutual handholding is the only option.
The Budget is still some months away. Are you thinking of increasing the budgetary allocation for healthcare from a low single-digit?
The last Budget had stepped it up. But there are suggestions to make it 6 per cent or 10 per cent of the GDP, and these are absolutely normative goals we have to reach. But also look at the absorption, the base to which we have to pull that resource. Even if I give that, I have to also measure how much can be completely soaked into the programme that you’re looking at.
So, the nature and the template of increase in the health allocation has to be such that it goes to the block level. So the normative being achieved within 12 months would be very attractive for me to read out. But can the system take it? I would want to first of all prove that what I’ve done or stated in the Budget is getting executed. I’ve been now very intently going through as to how this is getting implemented.
Why is the government not offering free vaccination across the country?
Since January 16, when we launched the vaccine drive, the government started distributing the vaccines procured through two manufacturers. And also gave to states to distribute free. It was smooth. The government last October negotiated the cost and gave emergency certification to the vaccine makers. Health being a state subject, they wanted it decentralised. That kept building up and that’s why we have taken a call on a vaccination policy where 50 per cent is with the Centre (to redistribute), 25 per cent with states and another 25 per cent for the companies to sell to large hospitals.
Will that change now with states complaining about the process?
With so many chief ministers writing, I am sure a call will be taken by the Centre.
The Biological-e advance order of 300 million is a positive step by the government. Couldn’t this have been done earlier for some of the foreign vaccines?
That’s a legitimate question to ask. We paid Rs 4,500 crore to both these companies (Serum Institute and Bharat Biotech) early April for placing of orders for up to July…. Negotiations are going on with (foreign) companies and I’m not going to name them. We’ve been talking to people asking them to come up with meaningful ways in which you can increase the supply. We were engaged with them since November but they had said they were not going to supply to India.
Is the Rs 35,000 crore, that was allocated for vaccine, enough for this year or will there be further allocation?
I said that even then that if need be I’m willing to give more. The government’s systems will give it to vaccine makers so long as they’re able to give me a utilisation certificate. I’m not even hung up on it. I’m saying I’ll give it to the vaccine manufacturers without guarantees, take the payment in advance and give me the supplies. The moment you give me one lot of supply, I’ll give you more. I’m conscious of the urgency of the situation. It will go on as we negotiate with more suppliers coming in.
Any estimate of how much the allocation will go up by?
No. That’s difficult to say that at the moment.
The excise duty budget estimate for FY22 is lower than FY21. While the RE for excise duty for FY21 stood at Rs 3.61 trillion, that for FY22 is Rs 3.35 trillion. In fact, the actuals are even higher. Is the Centre contemplating excise duty reduction in the current fiscal year?
I said this even during the budget. Not just this, but on most elements, we’ve been very conservative.
In the Budget, you laid down an ambitious disinvestment plan which included privatizing two public sector banks besides IDBI and two insurance companies too. Will the second Covid-19 wave derail the privatisation plan in FY22?
On disinvestment, I’m on course. I shall do everything that I’ve said in the Budget this year, which includes everything that was approved by the Cabinet already and announced in the Budget 2021-22, including Air India. It is on course.
You had budgeted for Rs 1.75 trillion disinvestment this year. So will you achieve it?
I will try to achieve it.
When do we see the bad bank come up and how?
We have not called it a bad bank. That’s because what gets popularly referred to as bad bank gets a certain characteristic about it. Now we have designed something very different. You’re carving out the NPAs and bad assets which are sitting in the bank for a certain number of years. Those are taken out first for which provisioning is already made, but given to this holding company, which is an asset reconstruction company. And at that point itself they get a certain amount of money for which they made provisioning for. And post which, the ARC would work on it and AIIFs will come through bidding and take it. At that time, at whatever rate, this whole thing formulates for itself, even then the banks will get something for themselves. So this formulation is more transparent, more parties can come in for the bidding and we see that there is a lot of interest. So this is moving as per plan.
In the backdrop of slew of cesses on petrol and diesel, will the Centre be open to the idea of putting petrol and diesel products in GST?
Even at the time of constitutional amendment for GST, the government had very clearly spoken in the pre-Council empowered committee and everybody had agreed to have entry of petrol and diesel products at zero rating. That was the only thing which was allowed at zero….
Talking of GST, many state FMs have raised this concern of how GIC (attorney general on implementation committee) and law committee took independent decisions without consulting the council. They’ve called it unconstitutional. Do you think these concerns are valid?
This was mentioned by the Punjab finance minister. He subsequently sent us a letter. We are living in a time when decisions have to be taken rapidly. This provision of the GIC is not new. The GIC is not just with Delhi bureaucrats. There are officials from a group of states. Then they take political guidance. It’s not a set of people guided by the finance minister sitting in the finance ministry. They are officials who know the intricacies of what is developing. If you’re telling me that this is being held against the Council and power has been usurped, it’s very unfortunate. It will cripple the functioning of the GST, if in case there is a need for emergency decisions…. In fact, I was accused of running a talking shop at the Council meeting. Do you expect me to say — oh, sorry, you can’t speak…. or no, I don’t agree with you… or I don’t like your face. I thought consensus was important, like it is in Parliament.
In the context of the Group of Ministers (GoM) that was set up for GST, Congress has said the party is not represented. Your comment?
From when have they (Congress) disowned Maharashtra? Isn’t Ajit Pawar there? This is so much attention seeking syndrome by Congress. It’s all about my family, my dynasty in that party…. This is really politicising the GST Council which is a very good federal platform. I’m sorry, it’s hurting every one of us and people who speak about institutions should respect institutions.
There was a GoM meeting yesterday and it seems no call was taken on vaccine taxation and that it’s back in the GST Council’s court. Is that correct?
I don’t know as the report has not come to me yet. The GoM should submit its report by June 8, after which we will decide on the next Council meeting.
On a different subject, what are your thoughts on market indices touching new highs? Do you believe there’s a real disconnect between markets and the real economy? RBI has also talked about a bubble.
I think it is a fact that the fundamentals of the economy are stable and doing well. Just before the second wave, you saw how the indicators were. Whether it’s the PMI on goods or services, electricity consumption, FDI flow, foreign exchange reserves, the indicators have been sound. Fundamental being strong attracts investment. If market indicates that, it’s a sustainable investment. To think it’s a bubble, I’m not sure.
Are you thinking about monetization of the deficit?
I don’t have anything on that at this point. I’m in touch with the regulators. But it’s not a binary or a bubble that I have to panic.
Your views on government measures related to economic offenders and getting them extradited?
The government has said the offenders would be brought back.
Is the government reviewing the IBC code to prevent errant promoters from taking control of the companies which are in the resolution process?
Well I think we’ve made our position very clear. Our position is that promoters cannot come back through the back door. I’m glad that the courts have come out in strong support of the legality and the legitimacy of the Act itself. We now have to make sure that it gets implemented at every stage in each case.
What would be your broad message to the poor people of India or the middle class who are looking desperately for government intervention?
Well, I think since the last year itself, we have shown that we are a responsive government. We are fully empathetic. But we also have to be responsible enough to give a meaningful intervention.