Arun Jaitley on economy: Recovery coming, people calling it a crisis due to lack of understanding or politics

'India's economy is facing a few challenges that are predictably transient. Some people, out of a lack of understanding or for a politically colourable motive, are terming this transient period an economic crisis.'

That is what Finance Minister Arun Jaitley had to say to the Narendra Modi government's critics who have lampooned the Centre for, what detractors term, a slowdown in the Indian economy.

The critics include former PM Manmohan Singh, his finance minister P Chidambaram, Congress vice-president Rahul Gandhi as well as some leaders from within Jaitley's and Prime Minister Narendra Modi's own Bharatiya Janata Party.

However, Finance Minister Jaitley, in an exclusive interview with India Today, countered the bleak assessments of the Indian economy and indicated that recovery is coming.

Jaitley pointed to the recent economic data for the month of September and said that it showed inflation staying flat and a higher-than-expected rise in industrial output.

This, along with several other upward revisions, are signs that a recovery in the Indian economy, which saw a disruption due to last year's demonetisation and this year's Goods and Services Tax roll-out, is on course, Jaitley said.

Jaitley spoke to India Today at length while in the the United States of America, where the finance minister was on a week-long visit to take part in meetings of the International Monetary Fund and the World Bank. Here are a few edited highlights of the interview:


Arun Jaitley took the Opposition's criticism of the Modi government's handling of economy head on, saying that under the NDA, India has been among the world's fastest growing economies and has been that for three years in a row.

"When it was it that during the UPA regime, India was among the fastest growing economies?" Jaitley questioned, before answering, "Not once."


The finance minister also refuted criticism from opponents like Congress VP Rahul Gandhi that the roll out of the Goods and Services Tax regime was a good, but hastily and poorly implemented move.

Jaitley rebutted saying transitions take time. "There were 17 taxes and 23 cesses (before GST). There was parallel shadow economy operating. From an entirely retrograde system you switched to an online system that includes no visits by inspectors, there is no stoppage of goods and services," Jaitley said.

The finance minister also clarified that small and medium enterprises, which make up 90 per cent of India's enterprises, can file returns every three months. "Revenue may take time to settle down," he admitted. "But transient data can't be used to throw up hands and say a retrograde system was better."


When asked whether making it difficult for people to evade taxes with tools like the demonetisation and the GST regime could be seen as a politically unpopular move, Jaitley replied in the negative.

Getting people to pay taxes "makes political sense," the finance minister said. "After note ban, 18 lakh people made dubious transactions. They are (now) being questioned. But those (18 lakh people) are less than one percent (of India's population)," Jaitley added.

"Paying taxes is patriotic. How (else) does India defend itself, how (else do) we arm our defence forces or how (else) does India take care of its poor?" Jaitley questioned.


Continuing in the same vein, Jaitley brushed away assertions that demonetisation and the GST roll-out would hurt the BJP politically due to the distress caused to the party's core constituency, traders.

Jaitley, who happens to be the Bharatiya Janata Party's point man for the upcoming Gujarat election, said, "Any economy or leadership must have the broad shoulders to face the impact of these changes."

Finance minister @arunjaitley talks about Indian economy & GST in an exclusive interview with @Rahulshrivstv. #ITVideo

- India Today (@IndiaToday) October 16, 2017


On the big question of whether the Modi government would go down the route of opening up public coffers to stimulate the economy (a move that could widen India's fiscal deficit), Jaitley simply said, "The job of the government is a balancing act (between public spending and maintaining fiscal deficit discipline)."

"The (fiscal deficit) discipline has been the credibility of the Indian economy the last few years," the finance minister added.


The banks' old system of lending and recovering money has been "shaken" by the current government, Jaitley claimed. "Earlier the culture was that people would take money and helpless banks would chase them (to recover the money). That equation stands changed."

The Indian banking system has managed to generate nearly Rs 9 lakh crore worth of bad loans. Asked if the banks should be held accountable, the finance minister chose to be cryptic, saying, "The banks could have done the risk management assessment better at the time of giving those loans."


Employment generation has been another topic that the Opposition has repeatedly used to target PM Modi and his government. The BJP government has faced flak for job losses and for the failure to stimulate the creation of new ones.

The creation of jobs, Finance Minister Jaitley said, has always been a worrisome issue in India. "Government jobs are limited. (But) there are a lot of jobs created at the ground level."

Jaitley said that current government initiatives such as the Mudra loan scheme for entrepreneurs will work to create jobs at the ground level.

"Those who seek jobs can become job providers through such schemes. Jobs will get created once the transition (in the Indian economy) is over and economy is further opened up," Jaitley added.


Is the telecom sector in crisis? "Yes, profits are down and there is intense competition," Jaitley admitted, but added that the crisis is "over stated."

"The game (in the telecom sector) is now reduced between few major players... Mergers and amalgamations or consolidation is inevitable process (sic) in service sector. Eventually you can't have 10 telecom operators. It may come down to 3-4," Jaitley said.


Privatisation of India's national air carrier is on course, Jaitley said. The Modi government had earlier decided to sell Air India, which is burdened with a Rs 52,000-crore debt, to a private player.

Jaitley said that a group of ministers is looking into the issue and will soon appoint a transaction advisor, who will assess the market in terms of potential buyers after that, terms of sale will be decided and bids will be invited.

On how the government intends to divide Air India's Rs 52,000-crore debt, Jaitley said, "Once terms are fixed we will make it clear."


Sources had previously indicated that the Modi government, barely 15 months away from a bid to return to power, was working on a Universal Basic Income (UBI) project that would replace the leaky and much-discredited Public Distribution System (PDS).

Jaitley, however, refused to say much on the topic except that the government's move to transfer cash directly into beneficiaries' bank accounts is "moving (India) towards that direction."

Interestingly, the International Monetary Fund (IMF), whose meetings Jaitley attended during his US trip, released its Fiscal Monitor report, in which the organisation said UBI in India would outperform PDS in terms of coverage, progressivity, and generosity.

The IMF was quick to reject suggestions that it was advocating for the introduction of UBI in India. The report was merely a case study that was carried out in order to demonstrate how a large but inefficient scheme such as the PDS can be replaced, the IMF said.

Watch the full interview with Finance Minister Arun Jaitley here.