At the latest edition of Express Adda in Mumbai, Union Minister for Finance and Defence Arun Jaitley, in conversation with Consulting Editor Coomi Kapoor and National Affairs Editor P Vaidyanathan Iyer, spoke about the Modi government, acche din and getting investors back to India.
THE NEW GOVERNMENT
There’s a difference between the Narendra Modi and AB Vajpayee governments. In 1998, when the BJP took over, there was no negative environment in the country and neither in 1999. We had to add to what was being built. When we took over now there was certainly a negative perception about the country. You had to clean up the drawing board and rewrite some scripts.
Secondly, in Mr Vajpayee’s government, there was already a set of very senior and established politicians. Today, people joining the government have an opportunity to learn on the job, to prove themselves. Therefore, you find a lot of very hard-working ministers.
The styles of both the prime ministers are different too. Mr Vajpayee could, with a smile on his face, give you a message which you had to understand. Mr Modi is a hands-on Prime Minister. He works almost from morning to night. When I was a minister in Mr Vajpayee’s government, I used to leave office by about 6 o’clock, I would have coffee at the India International Centre. I don’t think I may be able to leave now before 11 o’clock. That’s the difference.
The defence ministry is very structured and you have many relationships with the services. The services have their own decision-making processes. But in the governance of that ministry, we’ve been ultra conservative. We’ve been conservative in the process of acquisition of weapons. You can’t afford to be very defensive in the ministry itself. For instance, we don’t allow middlemen. But there are some invisible people operating. If we get to know about some case, we immediately blacklist them.
I’ve made sure that the defence acquisition council meet at least once a month. In our last meeting, we decided that only Indian companies will apply for a supply of a very large number of transport aircraft. So, the idea is that people will enter into joint ventures and some private sector capacity building will take place in an area where our capacity was limited.
CHALLENGES IN FINANCE
In finance, the challenges are far greater. There are a lot of issues that have to be cleared in relation to taxation, certain policies. However, we have some advantages. We are a single party, majority government. We have no agenda for or against any particular private sector or any segment. We have no qualms calling ourselves a government which wants to encourage business and industry in India. With these advantages, we have to build on.
If we simply say that we are allowing FDI in a sector; investment won’t come in. You have to create an environment in which people are attracted to invest in India. That investment slowed down in the previous government due to a series of reasons — decision-making was slow as the PM was not the last word; mechanisms created outside the government were more powerful than the government; the government did not focus on production but on manner of distribution. There were also a series of cases of corruption. Our efforts have been to end the impression that ‘India is a country that suffers from policy paralysis’ and ‘India is a country where you find tax terrorism’.
ACCHE DIN & MEDIA
As far as acche din are concerned, I have not the least doubt that they’re already here. There is a problem these days — the media has very little idea of what’s happening inside the government this time. Conventionally, Indian media had almost become a part of the establishment so from what is going to be decided in the Cabinet and what move is being planned, they could predict a Cabinet or the list of governors, and these things days in advance. (Now) they don’t have too much of an idea of what’s happening. That’s an issue. I think that’s how it should be. Because the fun of the decision is lost otherwise. Secondly, you’re having to live with a government where you can’t report a corruption scandal every day. Government is taking decisions one by one, it’s becoming difficult to even criticise most decisions. If a government is taking correct decisions and there’s nothing shady happening in it, it’s much better times than the ones you’ve seen.
LEADER OF OPPOSITION ROW
From 1952 till 2014, you had umpteen elections in India. Seven earlier elections didn’t give 55 seats to a party in the Opposition. On all seven occasions, the Congress was in power. In 1952, 1957, 1962, 1967 and 1971, there was no leader of Opposition. In 1977, there was. Again in 1980 and 1984, there was no LoP. Since then, whoever got more than 55 (seats) was the LoP. In 1952, you had a regulation which is a parliamentary law that you need 10 per cent to be recognised as a leader of Opposition. The Congress, not in their wildest dreams, thought they would secure less than 55 seats. Now, parliamentary physiology recognises the difference between two phrases — LoP and leader of the largest party in Opposition. Congress’s argument is that they don’t have 55 seats, so let’s create a new rule.
GENERAL ANTI-AVOIDANCE RULES
The last government decided that the avoidance rules would come into play by April 1, 2015. I have not had an opportunity to reflect on that issue. I’ve started doing that. We’ll take a decision. I’m going to be fairly open about it. Conventionally, in India, avoidance without breaking the law was considered permissible even by the courts in taxation matters. Thereafter, the world over the thinking process has changed and you have some form of avoidance rules in a very large number of countries. Now in what manner are they going to apply, I won’t be in a position to make a statement right now because we are in a process of reexamining it. I can tell you that what had been planned by the previous government is being revisited. We will take a view on the date itself and also on the subject matter.
Foreign institutions are concerned about our stand in WTO. We were on the verge of finalising it (an agreement on trade facilitation) after so many years and, now again, it has been stalled and we are getting a bad name for it.
Deepak Parekh, Chairman, HDFC Group
Let’s have a relook where the WTO stands. On December 13, 2013, when the trade ministers met in Bali, the arrangement was that, by July 31, they will give effect to trade facilitation agreement. As far as trade facilitation is concerned, it’s a good thing to happen. Even without the WTO, we should have an internal reform in terms of state facilitation.
What is the possibility of India creating a sovereign wealth fund in this shape.
Manish Kejriwal, Founding Partner and Managing Partner at Kedaara Capital Investment Managers Ltd
I have not examined it. Therefore, I don’t want to hold an assurance — yes or no or otherwise.
There are many single men in power, but the laws are biased against single men. This is slowly becoming not a country for single men. What is your advice?
Suhel Seth, Managing Partner, Counselage India
Try and become prime ministers.
Nobody talks about tourism and hospitality. The sector employs 53 million people, yet we receive barely 8 million tourists.
Vivek Nair, Chairman and MD, The Leela
When we say the tourism industry gets 8 million tourists a year in India, it includes NRIs coming home. Our tourism numbers are very low. One of the steps we have introduced is e-visas and visas on arrival. The real tourists come to our beaches, hill stations, monuments, heritage centres. Most of these places need to be improved. A number of airports, fortunately, have been improved in the last few years. But our road transport, our railways — can they compete with the other important tourist destinations?
Allegedly you said rape is only a small incident impacting revenue and tourism. It hurt the sentiments of a lot of people. So was that statement made by you and in what context?
Shobhaa De, Author
I clarified the very next morning. It has nothing to do with the way it was presented. I hadn’t referred to any incident, but crime in general. Amongst the 10 reasons that hurt tourism, crime against women will also hurt the image of the country abroad, and also tourism. I referred to various factors like taxation, costs and so on, and somebody linked it with the incident that took place in Delhi.
Taxes on the entertainment media need to be reviewed. Starting from ticket window taxation to multiple taxation for DTH, all tend to be very high.
Sudhanshu Vats, Group CEO, Viacom18 Media
There is a large amount to be paid as interest to repay the debt. That’s one of the pitfalls of deficit financing. If every segment wants to look into their segment and seeks special rebate, money will have to come from somewhere. Therefore, you can’t have a situation where you give concession after concession, and then depend on borrowings or other taxes elsewhere.
Like any good cricket team, you would pace your innings. In the next five years, what kind of role would come to the fore, so we can predict what kind of innings you will play, and we get a sense of the score.
Ashish Chauhan, CEO, BSE
It’s not the right environment to speak about cricket these days. But I think the first task is to save your wicket, the second is to bat the full 50 overs, which is also becoming very challenging, and then unlike in cricket I don’t think we should look for the slog overs. Governance is slightly different, you have to slowly but surely, move in the right direction.
If you were to do a SWOT of BJP, what is the biggest weakness innate to the party that you think, in time, could endanger the economic story in India and what would the government and party be doing to contain that threat?
Milind Deora, former Minister & Member of Parliament, Congress
My advice to all my party colleagues would be not to be distracted. Governance is a serious business and, I normally don’t use this phrase, but look at what the Gujarat experiment was. After the unfortunate incidents of 2002, for the next 10 years there was an effort to distract the government. Mr Modi succeeded precisely because he refused to be distracted.
Why don’t you just get rid of the land acquisition bill, build a new one with some of the good things you said about a better composition etc.
Ajit Gulabchand, CMD, Hindustan Construction Company
If there could be a much larger review, that’s one way of looking at it.
Mr Nitin Gadkari who deals with the subject has already made statements of this effect. If that’s not possible, I’m suggesting Plan B because then the least we have to do is to add to that list of exemption which is more easily doable. I’ll tell you at times, in any reform process, please remember it’s the art of the possible. It’s not undertaking something and then saying so-and-so blocked it.
You mentioned you would reduce taxes if the GDP growth increases. Have you thought of doing the opposite — using reduced rates of taxes even if they are announced gradually — to actually add to GDP growth?
Adi Godrej, Chairman designate, Godrej Group
In the last budget, except for tobacco, soft drinks and products of that kind, customs and excise duties in most cases were reduced. For income tax concessions, though revenue buoyancy was less, I gave three categories of concessions to a limited class. Each of these cost us a lot of money but the reasoning is that you collect less taxes, put more money in the hands of people, make products cheaper so that the size of the economy grows.
Now that we find you on the other side, as leader of one of the strongest governments this country has seen in many years, I’m certain you will expect only the same courageous journalism you have loved, encouraged and even nurtured at the Express.
Anant Goenka, Wholetime Director & Head, New Media, The Indian Express, in his vote of thanks
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