‘Liquidity is still an issue… we shouldn’t get into an artificial high or low’

•Shekhar Gupta: You know you started out as being a young congressman as a member of youth congress and you have kept that youthful image.

Kamal Nath: well yeah, I started my political career as a member of youth congress. Those were different days. Congress had always been in the government. Those were days when BJP hadn’t been born. Then we lost the election in 77. youth congress had a formidable role at that time. prior to that we had the five point program. That was the time when Sanjay Gandhi

•Shekhar Gupta: You were a hridya samrat.

Kamal Nath: well I don’t know what name you want to give it. But I did have….

•Shekhar Gupta: That’s what you used to call him.

Kamal Nath: yes sanjay was known by many names. It depends on who called him what. So we had the five point program which eventually became not only a national program but a global program like tree plantation- each one plant one, each one teach one.

•Shekhar Gupta: But you did many funny things as well.

Kamal Nath: as a member of youth congress and at that age, of course you demonstrate in a different way. You have some kind of rashness, you have different ways of doing things.

•Shekhar Gupta: You were called sanjay’s youth brigade.

Kamal Nath: well yes that was one of the names we were given. But its because of that we came into the parliament.

•Shekhar Gupta: Its because of storming the courts sometimes.

Kamal Nath: well yes we did. We demonstrated in courts. We got into trouble for that. We did demonstrations all over country. Youth congress was going to jails all over. Those days between 77 and 80 were quite fulfilling, I must say. That was a phase, a very interesting phase and when I reflect upon it, I ask myself today I have really done that. But then again..

•Shekhar Gupta: There was also a minor matter of hijacking…of half a hijacking.

Kamal Nath: well a plane did get hijacked when Mrs. Gandhi was arrested. I think that was the first time a hijacking took place in India.

•Shekhar Gupta: With a cricket ball and an orange.

Kamal Nath: yeah it was a cricket ball in a towel. It was really nothing. It was more to rouse tension. That was it. Things moved on after that. We came into parliament in the elections in December of 79 or January of 80. and that’s when I came into parliament to lok Sabha, the 7th lok Sabha. So when I look back and think that it is so many years down the road, of course it is..

•Shekhar Gupta: And being in Lok Sabha since then. But for one small gap.

Kamal Nath: its been a long ride. I have now been in Lok Sabha for 28 years. Its been fulfilling but I have seen the transition into the fragmentation of polity. I have seen when we were borrowing from the IMF…you know when people talk of the IMF I remember one of my speeches in Lok Sabha commenting on the IMF. In my speech in april 1980, speaking in the debate on the budget, I tried to think of how different things were, the different India we were in. but that’s again I think very…its the process of acquiring wisdom.

•Shekhar Gupta: Yeah infact even that matter of little hijacking revisited you once on a foreign travel. Didn’t it?

Kamal Nath: yeah well they thought that since the youth congress was involved in it, they thought that I was probably also.

•Shekhar Gupta: Some name in some list in some country also.

Kamal Nath: yeah they did involve everyone into it. But then that’s ok.

•Shekhar Gupta: Those were years of learning.

Kamal Nath: yeah, those were years of learning. Those were years of…

•Shekhar Gupta: But you know the good thing about you is that your friends say Kamal never ages. Right, that you stay youthful forever. Your detractors say when will Kamal grow up.

Kamal Nath: well I don’t know. I am happy if that’s the only thing they say about me. What about me? What more can I ask for?

•Shekhar Gupta: But you know part of growing up is that as you changed the economy of the country has also changed and how the economy is managed. From being a completely sort of pretorian government to an enabling government.

Kamal Nath: I remember in 1991, when we had the cabinet meeting Dr. Manmohan Singh was the Finance Minister and at that meeting the issues of liberalization came, reforms in trade, reforms, it is more trade, investment. There were some very senior cabinet members who said what will happen to socialism, what are we doing throwing Nehru and Indira Gandhi out of the window. They were very upset about it. Dr Manmohan Singh said well this is the state of the country, tell me what should I do? It was a very I wont say acrimonious, but impassioned cabinet meeting in which the then Prime minister Narsimha Rao had to play it very carefully and that started the reform process.

•Shekhar Gupta: But he was one clever politician. He never said yes and he never said no.

Kamal Nath: He let everybody pick the right card. He put out the cards and you make sure that you pick the right card. Pick the card you wanted but that’s again skilful, that’s political management.

•Shekhar Gupta: Did he play that game with you?

Kamal Nath: I knew him since the youth congress days. He was general secretary of youth congress. So I knew him from 75-76, so I had seen him and he was from the constituency adjoining mine in Ramtek. He never contested from Andhra Pradesh. He contested from Ramtek which borders Chhindwara. So I had seen a lot of him and then you know the country that started the process of change, the change which led to India unleashing itself.

•Shekhar Gupta: Were you in sync with it when it happened or did you have doubts?

Kamal Nath: I know I did have doubts. I thought we were subverting india’s intellectual and entrepreneur abilities. There was a time when we needed it. There was a time so, its not that we should have done this earlier. We could have done it 2-3-4 years earlier. I am sure Rajiv Gandhi if he hadn’t been assassinated would have done it couple of years earlier. His thought process had started but then in 89, we lost the election. We did start of it 2-3 years late or 3-4 years late. But I must say this we needed what we were doing, the controlled economy in the 50s, the 60s.

•Shekhar Gupta: But you agree with those who now say that Narsimha Rao and Manmohan Singh may have brought about the change but the intellectual process of change in mindset started happening in Rajiv Gandhi’s tenure?

Kamal Nath: oh yes, infact Rajiv Gandhi I think had it all mapped out. He had it all mapped out that we need to bring in all these reforms. He himself told me once in 89 that we need to open up India. We need India to engage with the world. Because he had the great confidence in India and because he had the confidence in the country you are willing to let the country engage with the rest of the world.

•Shekhar Gupta: And if he had not been assassinated and had come back to power, he would have done that in an accelerated manner?

Kamal Nath: the success story of Indian reforms is that it was done in a calibrated manner because India had no model of reforms. We couldnt follow the south American and central American pattern. We couldnt follow the south east asian patterns. We are far too complex a country. And this caliberated method of reforms…

•Shekhar Gupta: You know am asking you this because you started as a young politician, you are still a young politician by the standards of our politics, not just young in your mind and the heart but even in age, also because you know the old fashioned politics, so in many ways you were the link between generations. Were there things people said to you? What is Manmohan Singh doing? What is Narsimha Rao doing? The country is sold.

Kamal Nath: On a daily basis. In fact, there was a proposal to allow private sector into coal mining and they said does this mean we are going to repeal Coal Mine Nationalization Act. What will happen to Mrs. Gandhi? I think it was so profound that they used to keep saying that what is he doing. There were only 3-4 of us who were solidly behind him for these reforms. The others were either skeptical or totally opposed.

•Shekhar Gupta: Thats you, Chidambaram. Madhavrao Scindhia…and Rajesh Pilot, yes or no, or yes and no?

Kamal Nath: Rajesh Pilot, yes and no…he was skeptical because he didn’t know what henceforth.

•Shekhar Gupta: Yeah because we know some in your generation were also strongly opposed like Kumara Manglam Rangarajan. Strongly opposed.

Kamal Nath: but then there were also those who thought it was right.

•Shekhar Gupta: Sangma was onboard.

Kamal Nath: yeah, Sangma was onboard. But there were others, I don’t want to take names who in the cabinet meeting said what is all this, this must not happen.

•Shekhar Gupta: You may not mention their names but they are still saying this.

Kamal Nath: yeah, but some of them are not there. Atleast one of them I remember is not there.

•Shekhar Gupta: You can mention that one.

Kamal Nath: No he is not there. I don’t want to mention him. But you know there were people of the old school like Sitaram Kesari you know who…others are still there.

•Shekhar Gupta: You know Sitaram Kesari once went to China. He led a parliamentary delegation and he came back and told me that the Chinese are like DTC bus drivers, they signal towards the left but turn right. But you have a good relationship with him at a political level. Also a fun relationship.

Kamal Nath: later, later…you know Sitaram Kesari was in his own mold. He became the congress president after P V Narsimha Rao, after the loss of elections. But then after that he didn’t really grasp he didn’t have enough time also.

•Shekhar Gupta: In some ways he was a bitter man which didn’t work for him. Now you may see another generational shift in your party- starting to work with Sanjay to working with Mrs. Gandhi then Rajiv, now Sonia Gandhi and now Rahul.

Kamal Nath: I have seen that unless a country and a party changes, that’s the most important thing for a country and in politics. If I was to try and contest my elections the way I did in December of 79, I would lose. You did it differently, you said different things.

•Shekhar Gupta: December of 79 you bought mrs Gandhi in and she got a crowd of 1 lakh in 10 meetings and that was done.

Kamal Nath: yeah. There was no television, nothing. People just had the faith. You have to change, politics has to change.

•Shekhar Gupta: I have heard stories of Kamal Nath in his car or jeep with a jar of Harriot’s cookies making pit stops.

Kamal Nath: well no. There were no harriot’s cookies. I don’t think I carried that I normally only carry my biscuits and sandwiches. But the whole process has changed and I have enjoyed this.

•Shekhar Gupta: But do you think the political class has now changed. They have bought the idea of reform or they still play as it suits them?

Kamal Nath: I think there are two types of political class. One is political class in the state who can either see only a negative of weight or positive of weight. They are not a part of the process. But here in Delhi there is a process. There is a process where there are some who are still opposed to it. I see this now within our party within our government that they feel what will the people say. I mean just take the nuclear deal. There were those who were opposed to it. Just didn’t comprehend what is good. You know always the biggest fear is that of unknown. So the thing is that don’t do anything because there is the fear of the unknown. But then you have to steer the country and, for a country as complex as India where you don’t have a model to follow.

•Shekhar Gupta: Would you say that politically Dr. Manmohan Singh and Sonia Gandhi handled the nuclear deal as skillfully as say PV Narsimha Rao and Rajiv Gandhi would have done in the past?

Kamal Nath: yeah it was done skillfully. I think people understood it, that there is energy issue. I think the basic thing wrong was to give it that name- nuclear civilian agreement. That sounds very ballistic. One doesn’t understand. But if you call it a simple energy agreement, people will understand what it is.

•Shekhar Gupta: Plus agreement sound better than the deal because deal is an Americanism that in India sounds like a sauda, not a good or a bad deal. You talked about the fear of the unknown. Today you have under your charge the richest, most enterprising, the most creative, most productive and most competitive Indians but also the most fearful Indians. Indian businessmen, Indian industrialists- you share their concerns and worries.

Kamal Nath: yes, because what we have seen in the world happen, we have seen icons of the financial system crumble.

•Shekhar Gupta: Industrial system- GM?

Kamal Nath: the first we saw were the banks, Lehman, AIG- these were the icons. Financial institutions, which everybody looked at. Everybody who had a job there or he could have an arrangement with them, was a customer or a client thought well this is really blue chip and 24 carat. That has shaken it up, you see. But then a year ago I was saying I was thinking to myself. I remember talking to some people. I was in US and I was being given lectures on best practices. It was a program in Chicago, whatever I was there. India should liberalise- we should open our financial sector, insurance sector. We are too over regulated. And I said you know you people have the best practices, we have the next practices. We want to do it in a calibrated manner. But I thought to myself here is US, where financial system is in a orbit of its own. Their economy is in a orbit of its own. These two orbits are not converging. And the whole US financial system was built on valuations. Valuations created paper and that paper created the liquidity. The moment you didn’t have the valuations, you didn’t have paper and you didn’t have liquidity. And it all came down like a gas balloon.

•Shekhar Gupta: And we suffered collateral damage as well?

Kamal Nath: Well everybody suffered. You know because if US has the biggest engine of the global economy which is driving the global economy. We see Europe being suffered because Europe’s exposure was tremendous. Two big trading blocks- Europe means the entire European union, and when we talk of US we talk also of NAFTA countries. Both of them having these serious issues, then it became a confidence issue. It became a credibility issue. One of our banks in India refused to accept a letter of credit opened by a major international bank. I don’t want to take its name. They said it may go bust and we will be stuck. So we must….get their money. So it is that lack of confidence.

•Shekhar Gupta: So when these businessmen come to you more or less bleating now saying minister of commerce and industry please help saying interest rates are too high, money is not available, I may have to lay off people. I know you tell them not to lay off. But they are in trouble. Besides giving them advice and suggestions what are you going to do?

Kamal Nath: you see in India we have not had the hit that US had. US hit was based on their banks, financial system. Our financial system is very sound; none of our banks are in trouble. Our issue is the liquidity issue which we have to ensure doesn’t become a insolvency issue. That’s what we are seeing. We had too much of liquidity. That’s why we had to counteract the money market because we ran into inflation. Our inflation exceeded 12 %. That meant we had to pullout money from the money market. Now again in a calibrated manner money is being put into the market. So the liquidity issue will go.

•Shekhar Gupta: So you think liquidity issue is not behind us. As and when is required money will be brought in?

Kamal Nath: No liquidity issue is still there. Yesterday, when the PM took a meeting. He set up a committee which he chairs himself of the finance minister, myself, deputy chairman of planning commission and the reserve bank governor. We sit and we look at issues.

•Shekhar Gupta: How often it happens- once a week?

Kamal Nath: yeah, once a week, once in ten days. Then under that is a similar committee of secretaries which is looking at current economic crisis. There is a special committee being setup. They look at it first. What can be resolved they resolve, otherwise it goes upto the PM. Liquidity continues to be an issue. We have to make sure that by not putting too much liquidity, if we put too much fat in frying pan, we are going to have trouble with inflation. So while taking care of inflation we are seeing.

•Shekhar Gupta: Because you know some of those under your charge for example, what is called real estate companies, are really infrastructure companies, urbanization companies.

Kamal Nath: we have discussed that yesterday and I can say that housing, construction is extremely important- that drives industry, cement, steel, that drives unskilled labour.

•Shekhar Gupta: You can’t dismiss them a built up mafia. You cant take a judgmental view on them.

Kamal Nath: absolutely not. These housing, construction companies are very important. You know you have L&T Larsen & Toubro, a builder.

•Shekhar Gupta: You cant be hung out and dry.

Kamal Nath: so now you know some efforts, some relaxation, some leeway is being given there. Government is conscious of that. We are looking at this very seriously but I don’t want to say what is going to happen. But reserve bank will be acting on it.

•Shekhar Gupta: What else do we see? Are you worried about the rupee? I mean exporters should be happy.

Kamal Nath: yes exporters are happy but that would be artificial. You see, we shouldn’t get into artificial high or artificial low. So we are going to ensure that rupee doesn’t get artificially low. But whats happening is that dollar is getting stronger. Its not that rupee is getting weaker. Dollar is getting stronger if you see it against the pound, the euro. That is the other part of it. Then there have been so many dollar outflows. We had about 12 billion move out from our institutional investments. So dollar outflow is taking place in a short span of time. In about 6-8 weeks we lost a huge amount of investments which again is a tribute to India. All foreign institutional investors thought that the most easily encashable stocks without taking a hit is India.

•Shekhar Gupta: Infact the most remarkable thing is that we have managed the crisis so far without spending a paisa from the exchequer, without shutting down any market, without reversing any reforms including ban on shortsales. All that we have got right. Kamal tell me one thing if we meet three months from now as we will would you say that no major Indian corporate, no major Indian bank would have rolled over.

Kamal Nath: Nobody would have rolled over. They would be in trouble now. Here was Indian industry, we must also get one thing clear, had got so used to making 50-60-70 % profit. There will be a time because of contraction in global economy.

•Shekhar Gupta: They will have tough time but you are sure nobody would have rolled over. No icon of Indian industry.

Kamal Nath: Nothng of that sort. We are not towards that in any case.

•Shekhar Gupta: You say that with a smile and on your birthday. All the best to you.

Kamal Nath: Thank you very much.

Transcript prepared by Rupinder Kaur.