Reforms mean empowerment of poor. We have most successful financial inclusion programme: Arun Jaitley

The challenges from 1947 to 1991 were entirely a Congress creation. One can understand that in the initial years there was a lack of resources, but I am one of those who believes that the ’70s and ’80s could have been a period of some economic opportunities, but turned out to be wasted decades. The Congress concentrated on populist slogans and redistribution of existing resources rather than increasing the quantum of resources. The regulatory mechanism, state controls, preventing private sector energies, was actively supported by the Left. There was also an element of crony capitalism in-built in the licensing regime. Don’t allow capital, don’t allow too many players in a sector. Take automobiles for example — it was, ‘let the people learn to live in an era of shortages’, this was the Congress track record from 1947 to 1991.

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Arun Jaitley with Atal Bihari Vajpayee and L K Advani in 2004. (Express Archive)

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So what was the situation like in 1991, when the big crisis hit? The way you assess it now?

I think in ’91, we were confronted with three basic facts. This Left and regulatory thought had all rejected the applicability of the growth of many Asian economies: Japan, Korea, Singapore, Taiwan. These are low-population countries, and their model doesn’t apply to India. But China had started turning around after rejecting that entire idea which they represented. The buzzword was increasingly going to be — which it did indeed become — that if China can do it, why can’t India, because in terms of population, poverty levels, we were closer to them. The second [fact was that] compared to the rest of the world, India looked exceptionally bad at that time. The third was the immediate crisis of 1991, the foreign exchange. I think it goes to the credit of the Narasimha Rao-Manmohan Singh combination that they seized this opportunity, not because of the Congress, but in spite of the Congress. And therefore, when Dr Manmohan Singh says that at times he felt almost isolated, we must respect his word. I think what they really did was taking steps of integrating India with the rest of the world, de-licensing, opening up opportunities for the private sector, permitting people to get raw material from outside, easing of imports, trade barriers being reduced, taxation being brought down, currency being devalued to make it more realistic. And I think after the initial reforms, Congressism struck back at them. That is what establishes that this was more on account of in spite of the Congress, than because of the Congress. The Congress almost had a guilt complex about what the Rao-Singh combination was doing. I think when it carried over to the United Front (government) the most significant forward movement that took place was further tax rationalisation. That was in the Chidambaram Budget. That was one more step forward.

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How do you look back on the reform record of the NDA government headed by Atal Bihari Vajpayee, of which you were a part?

NDA-I didn’t have the qualms of being conscious about reforms like the Congress. Therefore, they started taking some bold decisions. One of the boldest decisions they took was, in the initial days, to substitute revenue-sharing for high licence fees. High licence fees was a barrier to telecom, revenue-sharing was the enabling instrument. I think Atalji, I used to see him in cabinet meeting after cabinet meeting, when the debates between the for- and against-reforms took place, he always had the last word, he allowed the debate to go on, and in the end, his nod was normally on the side of the reforms. He brought in the idea of privatisation. Then I think he gave big ideas: infrastructure, setting up of regulators, which started helping.

I think as this went further, just as the ’70s and ’80s were not eras of great activity, UPA-I and UPA-II lost an opportunity. You see, UPA-I was crippled by the lack of reforms because of the participation of the Left. And the agenda in UPA-II was derailed by firefighting corruption. In fact, instead of reforms, [there was an] expansion of subsidies, retrospective taxation… these became counterproductive years. Then when it has come to the NDA [again], I think the NDA has two political advantages. First, that the BJP has a majority on its own. The PM himself is decisive and oriented to reforms. There is a full agenda. If we continue to do what we have planned, we will take the whole five-year term to do it.

But how does NDA-II compare when the perception is that NDA-I was far more reformist?

NDA-I emphasised on infrastructure… We have said that 10,000 km of highways in one year, complete all rural roads by 2019. We have tripled the amount to be spent on rural roads. Now, smaller airports for air connectivity will increase. Rather than populism in announcement of trains, [we are seeking to] strengthen Railways in every sense, whether it is tracks to stations to private participation. So, now you have locomotives being manufactured by GE and Alstom. You have 400 stations. The tenders are out, to be renovated, which is a part of the infrastructure. A large number of airports [are] now [to] be developed in regional centres with subsidised tickets, [there will be] more seaports, renewable power, more power generation. That is one.

Second is the emphasis on rural India and agriculture. So the instrumentalities we have devised is of rural roads, irrigation, electricity in every village by 2018 — a target we will achieve. Rural toilets, higher interest subvention, more credit to the farmer. Then rural housing. Unless their lot improves [things won’t change]… And I think the third area, which has started well in some areas, is that for the first time, India is being given the whole concept of social security. You see, the empowerment of the rich is not what reforms mean. It is also the empowerment of the poor. So here, in terms of financial inclusion, we have the most successful programme, in terms of low-cost insurances, in terms of structured financial lending through Mudra. Now, crop insurance, health insurance for the poor, subsidised by the state. These are all new packages of social security which are coming in. Decentralisation, in the sense that states are today far wealthier than what they were. More recourses are being provided.

In Tuesday’s edition, Union Finance Minister Arun Jaitley will speak about GST, banking reforms and PPP among other concerns. File/Express Photo/Prem Nath Pandey

So what are the challenges ahead?

When I look back at the past two years, I think in three tranches, we have opened the economy more and integrated it, so there has been a series of FDI reforms. And at a time when private investment is slow, FDI has been an important additionality of resource. Secondly, in central government-oriented areas, we went ahead and eased business systems. Today, 95% of the investment in India will come without the FIPB [Foreign Investment Promotion Board], so people don’t have to wait. Green approvals have become easier wherever they have to be granted, corruption is eliminated, individual discretions are going to be eliminated, so we are gradually moving up the ease-of-business ladder. Even today, if we are behind on the list, real estate is the largest contributor, which is a state subject. Land and real estate, if you reform the two, you will have such a big quantum leap.

What are the other reforms that you are looking at?

In fact, the bankruptcy law will give us a good jump this year itself. Then comes taxation, there are four-five factors here. The first is to get stability. The illness that UPA had left behind… retrospective tax, unreasonable demands, we have to end that environment. Secondly, to create an environment in the country where people prefer paying taxes rather than evading them. So all these schemes that we are coming out with, compliance window etc., it is to nudge people to get into the tax system so that the number of assessees increases. Then, add stability to taxation and get rid of the retrospective legacy that the UPA left behind. Then, corporate tax rates must become globally competitive, because otherwise nobody will invest in India if you have to pay higher taxes in India. This is all work in progress, we are all moving in that direction.

The last thing is GST, where all the states are now virtually unanimous. Then comes rationalising subsidies. Aadhaar was a good idea of UPA-II but you see it was an incomplete idea in UPA-II, that everyone must have a UID, fullstop. That was the entire idea. We changed the structure of the law… to obtain revenue benefits of the government, for monetary benefits of the government, you need a UID. Therefore, this has moved further. I think two of the main areas UPA-II got bogged down because of the corruption in allocation of resources: spectrum, coal, mineral. We changed the laws and ended those discretions. There are online auctions [now].

You have often criticised the Congress for its approach towards subsidies. But the NDA’s approach is no different, according to your critics.

Subsidies will remain, but are being rationalised. So they (subsidies) must be targeted only to the poor and not the rich. In the first round, ‘Give it Up’ kiya aur 10 lakh se upar cooking gas khatam kiya. Petrol, diesel market-linked kar diya. For the last 50 years, people have spoken of rationalising subsidy. This is the first government that is actually rationalising subsidy and just targeting the poor. Gareeb ko to aap cylinder bhi free de rahe hain. Then, I think there are three very important three initiatives. One is, we use the savings because of oil very cleverly. Oil companies ke losses write off kiye, consumer ko thoda advantage diya, aur baki sara infrastructure mein de diya. Those who own cars also drive, so you must give them the roads. So, I think our infrastructure funding and today’s infrastructure growth actually is also an improvement on NDA-I.

Union Finance Minister Arun Jaitley in his office during the Budget session of Parliament in March 2016. File/Express Photo/Renuka Puri.

And what are the next big challenges over the next two decades or more?

When I look back… the difference this is making… I think India will become unrecognisably different from pre-1991. We have to make sure that rural India also becomes different. That is when the reforms reach their success. The middle class and the aspirational class, which also includes the neo-middle class, is expanding. A lot of barriers now are being broken. Children from the Kashmir Valley are getting into the IAS, Dalit entrepreneurs are emerging, people from very modest backgrounds are coming up with start-ups. Iska best test case hai, since I am a great supporter of reforms. Pre-1991, the state decided as to who would do well. Today the market decides who would do well. So take up the list of 20 largest business group in India pre-1991, and see how many of them have survived in the first 20, and prepare a list today in 2016 and you will see the difference… the pecking order. And I think these barriers [are] being broken…

The next important advantage of this has been that India’s resilience in a crisis has also increased. So, therefore, the East Asian crisis, the 2008 global economic crisis, the Brexit impact… so, if you see each of these issues, our resilience to face these crises has significantly improved. One of our next big challenges is that we are an important superpower in services. Now, with the Chinese wages moving up, can we correspondingly move up in manufacturing? Smaller Asian economies are doing well in manufacturing. Can we have the advantages of economies of scale? Also, I think this is symbolised in various other ways: one of which is also soft power. So if you see, 25 years ago and today… so from Bollywood to cricket, as a soft power, you are far stronger.

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This is part I of the interview with Union Finance Minister Arun Jaitley. On Tuesday, the minister on answering critics, banking, GST, and PPP.