The government is closely monitoring developments in the economy, including the slump in the automobile sector, and is open to sectoral interventions, Union finance and corporate affairs minister Nirmala Sitharaman told Deepshikha Sikarwar and Vinay Pandey in an interview. Edited excerpts: 

There are renewed concerns over growth. The International Monetary Fund (IMF) and Asian Development Bank have cut forecasts and also pointed to demand issues. Corporate results have been muted. Are you worried? 
Well, not really. I wouldn’t say worried. Of course, I will be closely watching developments and making sure that timely responses are made from the government’s side, not knee-jerk but considered (reactions). I don’t want to sound complacent, but it is also a fact that in spite of global headwinds, India is keeping its head well above the water. And, if you notice, this particular assessment of growth is not just for India. Globally, economies are slowing down, but we are managing to keep it at 7 (% growth) or above. It’s an observation by the IMF. 

I think there are ways in which we can closely monitor and, within permissible space, take steps to keep engaging with stakeholders and responding timely. So, I think the policy space is what I am looking at being actively engaged with. 


One of the tax proposals, the super-rich surcharge, has also impacted alternative investment funds (AIFs) and foreign portfolio investors (FPIs) that are structured as trusts or associations of persons. Is the government thinking of a review, ring-fencing them to provide relief? Also, at the time the issue of super-rich tax was broached, was its application to FPIs and AIFs deliberate? 
No, to be honest, I don’t think it was an intent; we didn’t aim to touch the FPIs. The intent was more to look at putting in a surcharge from the point of view of incomes above 2 crore and 5 crore and within them, make sure we calibrated. But of course, it has touched those FPIs that are registered as trusts. Although I don’t want to be tempted to repeat the dialogue, it is possible, and we are, as a government, willing to even help out if FPIs registered as trusts want to come over to being companies. 

While it encourages me to know that FPI flow into the country during May-June has been fairly high and not drastically fallen because of this (surcharge), I hope people understand that the intention was not to touch them. But, of course, if the question is of transition becoming difficult, I don’t know if it is expected of the government to do anything to ease the transitional problems. I am willing to hear (out) the people.

Now that it has become an unintended consequence, the FPIs and markets are looking for a signal that there will be a kind of rethink on that... 
Well, see again, once you start rethinking, it becomes a dialogue of what is the level of rethink. Are you looking at yielding only to FPIs? Then what happens to domestic investors? And then what happens to not having a level playing field between FPIs and domestic investors? It becomes a newer set of questions that we have to look at. So, I will leave it at that for now. 

But you are open to inputs..? 
The question is, we brought it in with an intent and the intent was to touch incomes beyond Rs 2 (crore), beyond Rs 5 (crore). If you are registered as a trust — and trusts’ legal status being what all of you have known — to tell me that the intent of the government was to hit at FPIs is absolutely inconsistent with a logical set of arguments with which we can talk. To me, it doesn’t even take off as an argument. 

Stakeholders say conversion of FPIs into corporates is not tax neutral. Will we look at finding some sort of a window to facilitate it so it becomes tax neutral? 
If this issue of conversion is becoming tedious or conversion is not tax neutral, I am quite willing to hear them out. But as I said, the intention was to touch incomes that are beyond a certain limit. I am quite willing to hear what the difficulty in conversion is, and if the conversion difficulties are so severe, I certainly have to hear them out. 

There was this proposal to borrow overseas but now we are hearing the Rashtriya Swayamsevak Sangh and the Swadeshi Jagran Manch have expressed concern and the Prime Minister’s Office has asked the finance ministry to reconsider. Where are we on the sovereign bond issue? 
I am hearing it from you. I am not doing any review. I have not been asked by anyone to do a review. 

So, you will go ahead? 
Well, I have announced it (in the budget). 

What is the next step in this? When does the next tranche come? 
I don’t think we have worked it out yet. 

The government stuck to the fiscal consolidation roadmap in the budget. The RBIgovernor also complimented you on this. Inflation has remained benign so far. Do you see room for further rate cuts to boost growth? 
I’ll honestly wish (for a) rate cut… and yes, a significant rate cut would do a lot of good for the country. I am conscious that the RBI has taken a very accommodative posture and done nearly… 75 bps (basis points rate cut). We will now have to look at that route with a lot more hope. The industry also feels there is space for it. 

The Comptroller and Auditor General has expressed concern over the quality of fiscal deficit, particularly increase in off-balance sheet items. Is the finance ministry looking at what the CAG has said? 
Of course, we look into what the CAG says. The comments for the previous financial year that they have made are some things that are seriously being looked into. The questions that have arisen there are due to extra-budgetary resources that have been generated. We are certainly looking into that. We are not unaware of the issues that they are raising. 

The auto sector is facing a crisis. Dealerships are shutting down, companies are cutting production. Are you looking at measures to perk demand? 
I have been engaging with the auto sector — different stakeholders differently — about the sector and its demand pattern or if the demand is plateauing out and there is an indication of a kind of slump. Various reasons are being attributed to it (but) it’s the diagnosis that I am interested in, knowing what is actually bringing about this slowdown and what it is that we have to do from our end. 

Vitally, the kind of input which I am thinking of and also putting in a context is — we are at a stage where, from January 1, 2020, the Bharat Stage VI (emission norm) is going to come in. I am getting the input that buyers are looking to wait till the 1st, see if the industry is giving any kind of a discount to favour or push that BS VI vehicle. 

Is that going to be one of the reasons why the slump is happening now, or are there any other factors? There are different inputs coming in. We will have to introspect on all that and see what we can do. 

Yes, we recognise that the sector contributes substantially to GDP and towards employment, and that mobility is a very critical factor for all sections of society. It has a big implication and I am therefore keeping a very close watch on it. 

You talked about policy space with reference to the economy. In the run-up to the budget, there was talk of revising fiscal goals but you have stayed with consolidation. What is this policy space? What can be done to reverse the slowdown? 
I am not sure there is a one-step solution. It has to be calibrated for each industry accordingly and also, yes, your reference to the fiscal discipline and consolidation routine that we have set ourselves is important. I had to honour it. Over and above that, a whole lot of factors are to be considered. I am also hoping that the industry, post the budget, is able to see that this government’s intention is to make it possible for it to function with more ease, more comfort. Where it is possible, I have addressed tax issues, particularly in corporate tax. (In) that again, as much as in fiscal discipline, I have honoured the trajectory that was given to me, the glide path. So, the intentions of this government (are) about wanting to bring in greater ease of doing business, keeping commitments that have been given, fulfilling commitments that have been stated earlier. These are the messages which I want the industry to read, saying that we are with them. We honour the commitments that have a larger implication. 

You spoke of a calibrated response to industry-specific issues. Are you open to sectoral incentives for areas under stress? 
That’s been the approach of the Modi-led government. Didn’t we look at, say, textiles and footwear in the last tenure? We have consistently kept that sectoral support, even in this tenure. Within the (first) 100 days, we have shown our intentions very clearly — our support for these potentially good exports-driven sectors, potentially good jobs-giving sectors, potentially good medium and small industry-based sectors. We have maintained supporting many sectors that work under the small and medium kind of profile – (even if) it is through banks’ lending. 

While you may see our response to the NBFC (non-banking finance companies) crisis as responding to a crisis, I see it as responding to an institutional framework, which helps the small and medium industry. It’s one thing to look at our response to the NBFC in one way. But in your asking about sectoral response, for several sectors that are typically driven by small and medium enterprises (SMEs), I see that supporting the NBFCs as a platform through which their credit requirements are met is also giving sectoral support. So, on a macro (level) and in a broader sense, we are constantly looking to strengthen institutions that have a direct play with SMEs. And when I am talking of SMEs, I am obviously talking of those sectors that have a greater contribution to exports, job creation and so on. 

There is a persistent complaint about liquidity in the NBFC sector despite the measures announced. Can more be done to address the NBFC issue? 
I am so happy to hear the RBI (Reserve Bank of India) governor speak so effusively on the issue of the liquidity crisis. If the government says it, it’s one thing, but the RBI is also saying it. I am not repeating his words. The summary and substance of what he said was that there is no liquidity issue. 

I am not totally negating it. The governor has said the RBI has ensured that liquidity has been made available. It is now for institutions such as the NBFCs to further it and extend it to the end user. But what the crisis is all about is this interpretation that there could be a liquidity shortfall. The crisis is probably that NBFCs are looking for credit-worthy claimants for loans and finding it difficult to get such people. Therefore, the extension gets delayed or the facility gets delayed. It’s getting interpreted as liquidity shortfall. That offloading based on some worthy securities is now consuming more time because security and genuine worth are taking time to evaluate. Strictly (speaking), it’s not a liquidity crisis, but a crisis to pass on the liquidity to genuine borrowers. 

One of the announcements in the budget was to allow the government’s stake in companies to fall below 51%. Will the government be open to reducing its stake in public sector banks (PSBs) as well? 
At the moment, we are looking at CPSEs (central public sector enterprises), not so much as PSBs. We thought it only makes sense if government holding is not over and above other public sector holdings. That’s why all of the above put together can stay at 51%, whether the government or the ministry directly… it’s government’s money after all. 

It allows room in PSUs such as ONGC and IOC, where the government is close to 51%. 
Well, the principle is that. But how quickly, how soon and how many are the things that we will have to work out. 

The report on cryptocurrency that recommends a sovereign digital currency and stringent punishment and fines for private digital currency has just come out. When are you proposing to take the legislation to Cabinet? 
I had the presentation done before me. The committee has done extensive work on it. Inputs that have come in; if I compare several other countries where this kind of study has been done on cryptocurrencies, we have done very well. 

They have gone much ahead of all other countries that have thought about it. It’s a very futuristic and well-thought out report. I have not spent time on it after the presentation. Of course, we will look into it soon and come back with a position. That was also reported in court as there is a case going on. 

There is a growing view that aggressive tax targets lead to tax terrorism, an issue flagged by many experts. Demands get raised and the dispute settlement mechanism is not that effective. Is that something that is on your priority list? 
First of all — and I even said this during the Income Tax Day event — the target that we have set is not at all unachievable. It is something that the tax department itself has agreed to — that it is not a demanding, unrealistic target. 

Second, I am personally giving a lot of attention and time to make sure that, where it is possible for us to seek an explanation or ask for information, we take that route first rather than rushing to initiate action. 

Third, I also proposed to the revenue secretary that I should go all over the country, meet with all kinds of people, different sectors and all segments of society to ask them — not that the media doesn’t tell me — what is happening. That is being worked out. If a solution can be offered in each zone, with the people, there is a certain sense of accountability that we can bring in the ministry. 

We were supposed to start from August 2. But, because the Parliament session has been extended, we have postponed that. I shall be going to different zones with income tax officials or even customs, and talking with all stakeholders. In the meantime, I am ensuring that officers seek explanations or answers through e-platform, rather than initiating action. That has already been done. 

Former finance secretary Subhash Chandra Garg said he has taken voluntary retirement and that he had sort of first spoken to the government a week before the transfer happened. Because this is quite a dramatic development, questions are being asked if there is more to it… 
Well, he had given the letter just the day after the government transferred (him). The letter literally came the morning after the announcement was made. I am not aware of any conversation with me before that. The letter is concrete evidence which I can speak about, that came the morning after.