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Question 1- How do you see the economic situation today and why have we come to this pass?
PM- We are certainly passing through challenging times economically. This did not happen overnight. A lot of it was due to developments in the global economy. The developments in the Eurozone have been a major dampener of global economic sentiment, till the Eurozone leaders hammered out an agreement a few days ago. Europe is the most important destination for our exports and any turbulence there will certainly affect sentiment here. We then had the oil price rise. For a country which imports nearly 80 percent of its oil, this badly hurt our trade balance. In fact, a major portion of our trade deficit is accounted for by oil imports. There were domestic factors as well.
Question 2- What are the top five challenges to the economy in the year ahead?
PM- The India Growth Story is intact. We will continue to work, as we have been doing for 8 years, to keep the story going. Some measures which I intend to focus in the short run are:
Bring complete clarity on all tax matters. We want the world to know that India treats everyone fairly and reasonably and there will be no arbitrariness in tax matters.
Control the fiscal deficit through a series of measures which my officials are working on and on which we will build consensus in the government.
Revive the Mutual Fund and Insurance industries which have seen a downturn. Absence of investment avenues has pushed Indian savings into gold. We need to open new doors so that savings can be recycled into productive investments that create jobs and growth, not into gold.
Clear major investments in the pipeline awaiting FIPB approval. Investors should feel that we mean business. We will also work towards improving the response time of government to business proposals, cut down infructuous procedures and make India a more business friendly place.
Most importantly, we have given a major push to infrastructure, particularly through PPP. A lot of investment avenues are opening up in Railways, roads, ports and civil aviation. The doors are open for the world to strengthen our hands and contribute to these vital sectors which will give a further push to the economy.
Question 3- How do you see coming elections in the states and the centre affecting policy? How do you guard against populist measures, given the size of the deficit?
PM- I am largely satisfied about the way we have progressed over the last 20 years. The fact that governments have changed many times in between but economic policies have continued means that the direction that has been set is seen to be the correct one by all parties. That is a source of satisfaction also.
However, there are a few issues that come quickly to mind when it comes to what else needs to happen. Firstly, we have yet to settle down to a stable institutional framework to manage an open economy. Our institutions are still evolving and it will take time till we see mature institutions in all sectors as we see them in advanced economies.
Secondly, the logic of an open economy and its benefits are still not widely understood among the general public. Public discourse still sees markets as anti-public welfare. The instinctive reactions of many, both in the political class and in the public at large, is to revert to a state controlled system. There is no realisation that a reversal to an earlier era is neither possible nor desirable. Even a neighbour like China has understood the logic of an open economy and is developing the institutional framework which is required for this. It is necessary that we change the discourse from a critique of an open economy to a critique of what is needed to make an open economy work better for the welfare of the people.
Lastly, there is the issue of distribution. We have lifted millions out of poverty. But, I worry that the fruits of an open economy will be increasingly captured by fewer people. I worry that a large segment of our population will be left out of the benefits of economic growth. We need to correct that fast.
Question 4- Foreign investors have been rattled by events such as the tax row with odafone. How do you intend to set their minds at rest?
PM- The investor community had concerns on some tax matters. The Finance Ministry, over the last three months, has been issuing clarifications and working with the investor community to bring greater clarity on the matter. However, there has been a slowing down of capital flows which normally would have covered the current account deficit.
That does not mean things have turned very bad. Coca Cola has announced to invest $ 5 billion in India just a few days ago. IKEA plans to invest a billion dollars. The pessimism in the media and the markets is far more than reality. Consumer spend is holding up and this has not been affected by interest rates. The Chairman of GE captured the picture correctly when he said "the mood in the market is worse than the mood on the ground". I agree with that.
Question 5- There is also a perception of drift, of policy paralysis. You have used the term “coalition compulsions” – is this the main factor? How do you dispel the impression of drift? Do you intend to communicate more often with the nation?
PM- I think it is a matter of perception. We worked under far greater constraints under UPA 1. However, there a lot of things which had been done under the previous government which we had to undo. We had to bring a healing touch to the nation, make minorities feel secure and included, and give emphasis to the needs of the common man who had moved to the background in the Shining India of the NDA rule.
The biggest achievements of UPA 1 were the healing touch which we managed to bring in and the focus on inclusive growth. We did this with widespread support across the spectrum of parties supporting us.
But difficulties existed then as they do now. Parties are entitled to their differences then and now. There were differences on the US Nuclear deal and there are going to be some differences now also. I do not think that the political landscape is radically different now as compared to 3 years ago. What has changed is public expectation. Now that the immediate problems caused by the NDA government have receded into the background, other issues are coming to the fore. This is but natural. That is the way of democracy.
As for speed, look at the way we responded to the 2008 crisis. We rolled out a stimulus package which ensured that we came out of its effects rapidly. We are passing through a similarly challenging situation and I am confident, we will roll out measures to restore economic growth once again.
Question 6 - In your role as finance minister what do you see as the roadmap for key pending reforms such as pensions, insurance and banking reform, the goods and services tax and the direct taxes code?
PM- Firstly, legislation is not the bottleneck to economic growth. Barring an issue here and there, most economic steps that need to be taken do not need legislative action.
More important is that we need political consensus in the government on some policies. These are genuine differences in opinion. So, in a democracy, consensus building is the key to long term economic success and we are steadily moving ahead in doing that.
Question 7- Can we expect some of the young ministers of state becoming cabinet ministers soon?
PM- You have to wait for a while for that question to be answered.
Question 8- When will you go to Pakistan? What are the ideal circumstances that would make such a visit possible?
PM- I am looking forward to visiting Pakistan. No dates have been finalized for the visit. As you know there have to be suitable outcomes for such a visit.
Question 9- How do you react to charges of corruption during your Prime Ministership?
PM- Never before in the history of India have so many steps been taken in such a short time to bring in transparency into the functioning government, make government accountable to the people for its actions and bring in measures to control corruption. The Right to Information is a landmark Act for which the Congress Party and its President will be remembered for generations. In fact, this single act has done far more to bring down corruption and bring in accountability than any other measure. It is the information flowing out as a result of this Act which is bringing a lot of corruption to light which would otherwise have been hidden.
We have introduced a Public Procurement Bill which brings in far greater transparency into government procurement and severe deterrents for wrongdoing. This would remove a major source of corruption.
A number of other bills are there such as the Whistleblowers Bill, the Lokpal Bill, the Judicial Accountability Bill, etc. which if taken in totality, will raise the standards of integrity at all levels of government.
Coming to the personal criticism, not only have I maintained a high standard of integrity in my conduct, I have endeavoured to raise the levels in the system as well. All these measures are a reflection of our Party's will to tackle corruption. As for criticism by media, that is their job and I compliment them for doing it effectively. My only request to them is to exercise some balance and retain a sense of proportion in their coverage of issues. Just as the pessimism over the economy is more in the markets and less on the ground, even in the case of corruption, I do not think there has been any explosion in corruption under my watch.
Question 10- What is that one thing that you would like to be remembered for?
PM- I have tried sincerely throughout my life to make India a better place to live, work and lead a fulfilling life. In some ways, I contributed to this as a Finance Minister. As Prime Minister, I have had a larger remit. I have worked on the same lines but on a larger platform. We have tried to build a peaceful, harmonious, secure, friendly, prosperous India where every citizen can aspire for the best in life. We have an unfinished agenda. I will leave it to history to judge whether I was successful.