What is the impact of several measures taken by the government and your assessment of the economy?
We are clearly responding to things as they develop. The usual sanctity about fiscal measures being attached to the Budget, and therefore waiting for the next Budget, was not at all a consideration. We didn’t hesitate to announce measures in between. Second, even for assessments in the private sector’s domain, we didn’t hesitate in getting them to understand (that) if there is anything that the government can do, we will. So, there is a nudge. Third, the measures have been taken after a lot of consideration and going through a whole lot of consultation.
We undertook consultations in such a way that it (a situation) could be responded to within a week or a fortnight. So, a measure like the corporate tax cut did go through the iterations but it happened in a very short period of time. Where sectors are raising different issues, we didn’t just hear and sit quiet. We came up with periodic responses. There was this thing (in industry) about ‘it’s all collapsing, it’s all doom’, but (industry felt) we can approach the government to see if we can get some response. On the issue of surcharge, where they said ‘you have driven away all the investors’, with a minor, calibrated course correction, (whether that was indeed the direct cause or not), you see that in the last month, we had highest-ever FPI inflows.
How long before the measures have impact?
A frequently asked question now is ‘so what happened after corporate tax cut’? Have investments grown? Have people started investing afresh? All that keeps coming. I have been talking to a lot of industry leaders who say it came just at the right time. It’s made a big difference to their books and that decisions on fresh investments are definitely being taken. Then, people say that it is not showing on the ground. It will show…I announced the cut on September 20, industry will take time in announcing major investment decisions. Many of the sectors are coming to us and saying that they are out of the distress they were in. On liquidity, people felt it was not adequate because of systemic problems. I kept proving in the presence of Reserve Bank, with their concurrence, to say that there is no liquidity problem. Liquidity is there but we need to move it. For the flow of liquidity, deliberately, after due consideration, we took the call for an outreach. During Navratras, we did that and followed it during Diwali where I said: ‘It’s all not going to be in Delhi, Mumbai, Kolkata, it will be going to the rural areas’. I said banks should do it along with your local area NBFCs. But what happens to those NBFCs which are not in a position to obtain liquidity from the banks? We asked for pooling of assets and partial guarantee was given by the government. So we came up with this idea of co-origination, go through the NBFCs.
When private banks, small finance banks, and microfinance institutions met me, they said their business is going fine and their growth is anywhere between 15% and 45%. And who are accessing loans? They are in the hinterland. Private banks are smelling the opportunity.
Has the Supreme Court ruling in the Essar case brought clarity with regard to the Insolvency and Bankruptcy Code (IBC)?
There has been some positive development on the IBC front with Friday’s Supreme Court ruling on Essar Steel. During the Budget session, we had to come up with a major amendment and that happened within three days. The narrative in media about the way in which the NCLAT has distorted the IBC spirit was not acceptable, I told the secretary. Yesterday, we had the Supreme Court order also. We see IBC’s constitutionality, legal strength have been established and that interpretation cannot kill the original spirit. And, more than anything else, especially now that we have come with a window for real estate sector, the committee of creditors and their role in giving a resolution has been established in this judgment.
Look at the benefits that banks are going to have. Their balance sheets will look healthy. There is scope for us to believe that the next quarter for banks will absolutely be much better. We are also making sure NCLT and NCLAT do not suffer due to want of resources, resolution professionals, work space. We have taken care of all that. Together with RBI we are spending a lot of time monitoring the situation of NBFCs, banks and I am again very glad that almost all banks are out of the prompt corrective action framework. Their health has improved and they are now able to extend support for the kind of demand the government is making of them so that the economy benefits.
We saw that consumer confidence was impacted after some of the data on the economy came in. This became a cycle. Is there a change in consumer confidence?
If consumer confidence is not on way to being restored, what do you think of the amounts that have gone out as loans during the two outreach programmes by banks? In the first round Rs 81,000 crore flowed out and in the second it was more than Rs 1 lakh crore. It is all over the country. Second, look at the way used cars are being bought. Third, car company executives, the big ones, have met me and I asked about their inventory. At least two of them said there is no issue. That could not have been without consumer sentiment. I didn’t meet the third company, but was told that the entire stock was sold and there was a two-three month wait. There is a clear indication that consumer sentiment is on its way to be revived.
There are concerns over revenue.
GST revenue should be better than the last month. Month-on-month comparisons can sometimes lead to a distorted picture. In between, there were concerns about leakages and malpractices, but they are being blown out of proportion. They are all getting plugged periodically.
There is controversy about consumption data…
Controversy over data cannot be for every data. On employment, NITI Aayog and ministry of statistics and the chief economic adviser have explained why in India, labour and employment-related statistics are not wholesome and you can’t really comment on it. The same set of questions may not apply to let’s say consumption. The government itself realised that there may have been some error and decided that we should not release it.
There are questions over RBI’s regulatory capabilities given a series of issues starting with PNB to IL&FS and now PMC Bank. The systems that they have didn’t seem to catch the alerts. When you address issues around cooperative banks and NBFCs, are you also planning to look at regulatory issues?
I have had discussions with RBI governor on this. I am aware within RBI there has been a lot of introspection. They are also seeing how they can get up to speed.
Are you looking at more steps to speed up investments, address red-tapism?
Improvement in systems, decision making processes, is showing now. Being a federal set-up, lot of decisions that have been taken at the Centre are finding a time lag when they reach the states and further down to local bodies. When factor of production related questions arise, around land and labour, states will have to come together and many of them are moving fast. The next layer of local government, where there are water and landrelated issues, and the last-mile infrastructure related issues around roads and three-phase electricity connections is what you want to be addressed.
We are moving on both with the expectation that we can complete them this year. The ground realities will play out.
More companies in the pipeline next year?
Let us get the first tranche cleared.
You were directly handling the Rafale discussion before and during the election. Was the SC ruling a matter of satisfaction?
Great satisfaction. Because the questions that were posed justifying a call for review, did not find any merit in the court. When falsehood (on Rafale) comes from that level of leadership, quoting leaders from other countries, and then there are selective media houses and selective leaks, the atmosphere was so vitiated. The courts of course, kept their cool and calm and went into the merit of the issue. I am very glad for that.
Any relief for the middle class in the next Budget?
Well, home-buyers are middle class. We have just made a major announcement on affordable homes.