Nirmala Sitharaman has not had an easy time as India’s finance minister — six months into her stint, the COVID pandemic hit India and the world. Two full financial years thereafter went in keeping the economy out of the negative in the face of a global recessionary crisis. Sitharaman’s hand was at the wheel all during the grim battle that kept India’s macro-economy above troubled waters and then into a rebound, with the GDP coming out one of the most creditable among major economies.
But the strain of uneven, jobless growth was being felt down the line and has become the prime focus of the Opposition’s 2024 election campaign. In an interaction with TNIE Editor Santwana Bhattacharya and Business Editor Dipak Mondal, Sitharaman takes all the hard questions on the economy, responds with her usual panache on the controversies, and discusses the BJP’s prospects in southern India.
Excerpts:
Economic issues usually do not have much resonance in elections, unless cast in simplified relatable terms. It’s the emotive issues which connect and rouse people to vote. This time, the opposition is focusing on issues like unemployment and inflation. Do you think it will get traction?
I think the opposition is just using those issues to get some talking points. Strictly speaking, this government, since 2014, has constantly kept inflation within the RBI range. Only once or twice, it might have crossed that. So, the data does not support the opposition claims.
The mechanisms are all there for you to see. The supply side problems were addressed by a group of ministers who constantly made sure, in advance, that the commodities we don’t produce were imported -- edible oil is a classic case, also the various pulses. Some agricultural exports were giving great income for the farmer -- whether it was onion, or even rice and barley, wheat and sugar. But when needed, we took the decision to ban exports.
But the opposition has raised the issue of unemployment in a very consistent manner…
Yes, but what the opposition fails to understand is that there is a complete reset in our labour market. Work has been going on to expand the areas from where data on jobs can be collected. It is a fact that in India we do not have data which is reflective adequately of the labour situation on the ground. We collect data on formal employment, but formal employment doesn’t constitute a large chunk of all employment in the country. The informal sector is today widening its base, and more and more new jobs are coming there. The gig economy is one of the biggest in-your-face examples of a sector which has grown exponentially, but on which data is not adequately catching up.
There are some areas where (this new) data is being captured. An e-shram portal has been launched, where people can register with a trade specified. Another example of data coming through a different source on the informal sector is where we have launched schemes, giving money through banks for beneficiaries to expand their business or put some investment into the business.
Under PM’s Swanidhi, you get data of people in the urban informal sector — people who are vendors in the streets. Similarly, we look at where the GST returns are coming from, whether it is to track demand for a particular product, or the MSMEs that are supplying them. Data is also coming from the GeM portal — the number of informal or small MSMEs who are getting registered in the GEM portal.
So, it is one thing for us to look at the same set of numbers coming from the same set of sources and say jobs are not growing.
On jobs, I don’t think the opposition has got any data which is reliable. I am quite happy the opposition is raising the issue, and I am quite willing to give an answer.
The BJP has been strongly focusing on electoral success in the South. It has a history of being largely thwarted in the region, barring Karnataka. Is that changing this time?
Don’t accuse me of doing whataboutery, but I will start with a whataboutery. You keep asking us why the BJP never intends to solve that issue of there being just the one fortress that we have in Karnataka. Tell me one place where Congress can enter now, anywhere in this country. I come from Tamil Nadu, I am married in Andhra Pradesh. Where is Congress there?
If I remember correctly, it was 1964 when Kamaraj was the last of Tamil Nadu’s Congress CMs. After that a national party like the Congress, even under Indira Gandhi and Rajiv Gandhi, could not set foot in Tamil Nadu. They played second fiddle to the DMK or once with the AIADMK. Even today, their candidates cannot even function without DMK support. Would you ask the Congress why they could not set foot in Tamil Nadu? You ask this question to the BJP, which is definitely showing signs of gradually expanding into all areas. Is the Congress there in Andhra? Has Congress formed the government in Odisha?
It is a very important question for our democracy to ask why a national party like the Congress today is only a second fiddle to state parties. India needs a good, solid national party as opposition and the Congress is failing this country on that.
The Congress is in power in Karnataka and Telangana..
You can always offer this kind of piecemeal logic. We were also in power in Karnataka. And then we also had some MPs from Tamil Nadu...you can always do this balancing act. I have asked you a question which is more pertinent to our democracy than your enthusiasm to prove the BJP is getting rejected in Tamil Nadu. No state rejects any party. From the Jan Sangh days, there have been (our) people in Tamil Nadu. Pon Radhakrishnan was elected from Kanyakumari, no less. And he was a minister under Vajpayee and again under Modi from 2014 to 2019.
So let us not revel in this idea about the BJP getting rejected somewhere. Pound the Congress if you have the courage, they are losing one after the other in states. It is becoming a fringe party, going along with people who shout separatist slogans, and they’re happy to be there. What a shame for a party which claims to have fought for independence.
So, among the southern states, where do you think is the fight heating up most?
I think each of the states presents a different challenge to the BJP — somewhere you’re just entering, somewhere else you’re trying to reclaim what political presence we have or had.
The big thing about the BJP is that it tries newer ways -- either offering a different set of candidates, or using old stalwarts, and making sure that we articulate the discourse which we are likely to take forward in that state. So, whether it is Andhra, Telangana, Tamil Nadu or Kerala, you have every possible option.
The contest between Rajeev Chandrashekhar and Shashi Tharoor in Thiruvananthapuram is a very interesting fight. Similarly, Suresh Gopi, who lost in 2019 (from Thrissur) but kept doing his work on the ground, without any noise. Sobha Surendran (Alappuzha) is another one of our really committed hardcore workers. Anil Antony’s candidature (Pathanamthitta), I think, has so much potential. And again, K. Surendran in Wayanad, a veteran BJP leader.
Kerala has gone to the court on the issue of State-Centre relations, so has Karnataka. The opposition has been saying that the Centre is showing a stepmotherly attitude towards states run by the opposition. What is your view on this?
First of all, I cannot say that states should not go to the Supreme Court, they are well within their rights to go to the SC, and I am happy to provide any data that they want from the finance ministry. And this, I am sure, is true for any department in this government because we are led by a prime minister who’s been a chief minister, and who during UPA had seen what stepmotherly treatment is. With that experience, Mr Modi, being in the Centre now as PM, knows that unless states get money in time, India’s development will be affected. You may have political differences, fight it out during polls, but there’s no business for any government to curtail the development of any state.
I had said this at a public meeting in Kerala — much before Kerala went to court — that I will put all the data out right there in the public meeting, which is what I did, and said I will equally be happy and ready to put the data before the Supreme Court, if they choose to go. We were happy to show the records. And the court has not told us we are wrong in the Kerala case. The court didn’t say we have to give an interim relief. The court has of course referred it to a constitutional bench to see about borrowing etc.
One other thing about Kerala — every state is allowed, according to the FRBM Act, to borrow to the level of 3% of the GSDP without any conditions. This is applicable to all states. What happened about the borrowings they did outside the budget is that CAG came down heavily — not just on Kerala, there were other states, too. The treatment offered to Kerala was the treatment offered to all those on which CAG had come down heavily saying that you borrowed from outside the budget, and that has to be reconciled. In the reconciliation process, they were given four years to return that money back to the system.
In fact, much before Kerala went to court, I myself called the finance minister of Kerala and told him if in that particular year they are really in a difficult position, we could extend the reconciliation by another year. Not a special favour to Kerala, but offered to all such similarly placed states. The court took cognizance of that as well.
Coming to Karnataka, I would like to point out two-three things before I get to this particular point. There has been some totally baseless commentary by the ruling dispensation to the effect that Karnataka was better off prior to GST, in that their indirect tax collection was growing at 15%. Data shows that pre-GST revenue growth for Karnataka was around 11.60% CAGR and post-GST revenue growth is similar at 11.35% despite COVID, which affected two financial years (2020-21 & 2021-22). So the Karnataka government is completely misleading the people with false data.
The second allegation is that compensation cess dues of Karnataka were not being given. There are no unpaid compensation dues to Karnataka, Rs 1.06 lakh has been given to the state between July 2017 and June 2022.
On their grievance that Karnataka pays one rupee, but gets only 29 paise...so I asked this question in reverse in Karnataka. The highest taxes in Karnataka are paid by the Bengaluru city. Can Bengaluru say we pay this much, give me the total money and leave Chitradurga, Bellary, etc without any money. So these are misleading, separatist kinds of arguments.
The last grievance is that the Centre is collecting cess and surcharges and that should also be put into the divisible pool. Cess and surcharges are collected as per the Constitution, over and above the tax collected. And that money also goes to states. So this is a vicious way of misinforming the people.
As for the recent case in the Supreme Court which, if I understand correctly, is about NDRF funds which have to come to the drought-hit areas of the state. The matter has been sent to the Election Commission. If they clear it, the high-level committee will meet and the money will be released.
There is concern in the South that they are going to get penalised for performing better, being more industrialised, for progressing better than other states. How do you address this concern?
These are very legitimate concerns. I have no differences here. I also know that some distinct progress has been made in some areas, and I agree they should not get disincentivised for that. But that’s not the business of the central government, that’s the business of the Finance Commission. If the Finance Commission gives me a recommendation, it’s my duty to obey. So voice those concerns, I repeat, legitimate concerns, with the Finance Commission, rather than politicising the issue.
What’s your view on the Congress manifesto, especially the parts about the economy? They are talking about a single-slab GST, which is present in some other countries. Is that implementable here?
I am really amused that they want to suggest improvements in the GST. People who were calling it Gabbar Singh Tax, and saying they would throw it out when they come to power, are now saying they will have to amend it and calling it GST 2.0. On the issue of single (GST) rates, Arun Jaitley Ji, finance minister at the time of introduction of GST, had openly said that in a country like India, with so many differences in levels of economic well-being, a single rate may not be fair. I am not arguing against it at the moment. But very clearly, what Jaitley ji said then holds true even now.
On the economy, I am not sure that they have taken a complete picture to be commenting on it. They are fiscally flamboyant and saying they will pay Rs 1 lakh to every (poor) family, they should explain where they are going to get the money from. Their approach to the economy is more knee-jerk, not well-thought through.
You mention economic disparities in the country. Recently, the Inequality Lab report termed the last 10 years as “Billionaire Raj”, and said that inequality is at the peak in India.
It is one thing to take a foreign study and say ‘look at what is happening in India’. I have my own doubts on some of these foreign studies. We are providing 80 crore people free foodgrains for the last five years, and that is continuing for the next five years, yet on the Hunger index, India is ranked below some of our neighbours -- where people who are standing in queues to get even rotis are said to be better off than us.
On income disparity, the way in which we have attended to providing basic amenities, houses for all, toilets for all, safe drinking water, Swachhata Abhiyan, they have made an impact. The World Bank study says that on multi-dimensional poverty, which is what NITI Aayog assessment results also show, extreme poverty has been brought down drastically in India. It’s one thing to say poverty exists while people are accumulating wealth, but we are also lifting people out of poverty.
Electoral bonds have been creating headlines. How do we create transparency in electoral funding and, after the Supreme Court order, what is the plan for political funding?
The Supreme Court, in its wisdom, has rejected electoral bonds. We respect it and we will have to follow the order. But electoral bonds were one step better than what went before. Earlier, there was no framework under which you were to function. At least here you purchase and redeem the bonds through a bank account. Of course, given the banking laws, and also given the way in which funding during elections happened in pre-electoral bond days, donors wanted to have confidentiality, and that was part of the law. Now, after the Supreme Court order, even those who benefited from the bonds are calling it a scam. How much of a chameleon can you be?
But irrespective of which party was taking donations, there is this question of actual quid pro quo. How do you address this allegation?
As far as quid pro quo is concerned, you are putting two and two together and saying this is a quid pro quo. These are monies coming from bank account to bank account. Our attempt was to clean up electoral financing. That’s why we moved to bonds, which was discussed in and approved by Parliament. Electoral funding will have to go through a lot more transparency, and on that BJP is committed.
Let us come to the other very political allegation against the BJP: that it is using ED, CBI etc against members of other political parties and forcing them to join the BJP. And once they join your party, they are kind of free of those charges...
People have moved from one party to another, gone back to the original party, come back to the second party they left and so on. Clean chits are not given by political parties, clean chits are given by the courts. Some parties are unable to retain their own flock, because members see no hope in their respective parties’ performance. They see a prime minister who’s working non-stop 24/7 and a party which is energised by that kind of leadership, they think they are in the wrong place, they move out. People are getting out of family- and caste-driven parties. They see hope in the BJP because it showed how people who were pasting wall posters or working at the booth level are rising to become somebody.
But what about allegations of high-handedness in dealing with the opposition – bank accounts are being frozen just before the election, sitting CMs are being arrested...
The first tax notice (to Congress) was sent in 2021. They did not respond, they hadn’t even filed the assessment paper. All that a political party needs to do to remain out of the tax net is to file an assessment. And then you are taken to courts, everywhere people pay up, you did not pay. And accounts were not frozen, there is a lien put on the money you owe the Income Tax department to the extent that to use that money; you will have to seek the court’s permission. You have not followed the rule of law or the law of the land, and you expect to be treated differently. On the question of chief ministers being arrested, eight summons were sent and yet you did not appear (before ED). Didn’t the Prime Minister, then the Chief Minister, appear before the CBI just before the Gujarat elections? He went and answered all the questions. But now this has become a big deal. I think it has become a business in this country to create that kind of sympathy, victimhood and then say this government is awful.
Of late there has been some criticism about India’s official data. The previous household consumption survey was not published, apparently, because data was not favourable. The census itself was not conducted. How do you do your planning and economic focusing if you don’t have these basic data points?
There’s no denying that data is important -- particularly that data which only the government collects, and when government collects, it collects from a large canvas, and therefore, it is necessary for policy planning, it is necessary for people to do further research on the economy.
An immense amount of work is going towards building proper teams which can do this work, statistically sound work, and therefore, I expect that should be ready as soon as the new government comes into place. And I certainly reject this observation that the last consumption survey was not published because it didn’t go in our favour. That’s absolutely not right. There were methodological problems. And as a result, they had to hold it.
