India has to take care of its interests, in this there are no friends or foes: Nirmala Sitharaman

Overseas investors selling Indian equities isn't a doomsday scenario, finance minister Nirmala Sitharaman said-they invest, make a profit and invest again. This only shows that the fundamentals of the economy are strong, she said in a post-budget interview with ET. Edited excerpts:

The government has done its bit on fiscal consolidation in the budget. Do you expect the Reserve Bank of India to respond with a rate cut to boost growth?
The Reserve Bank will take its own call. I can't tell. But certainly, they have started realising that more liquidity should be made available and they have taken steps in the recent past. We have got to recognise that as well.

The expenditure growth assumed in FY26 is about 7.5% over FY25 revised estimate. Does that give us enough cushion just in case there is a shock, given that we are also progressing with the fiscal consolidation road map?
Fiscal consolidation is not at the cost of our commitment to the various projects. It has not hurt any scheme. We had thought through the consolidation road map, and it is that which we are following. You wouldn't have heard anyone say we've cut down here and cut down there. I was also surprised that the media has actually picked up on the benefits that the PFMS (Public Financial Management System) is bringing in. It has shown that we have not been stingy with money. Money's lying in the treasuries. You can get the funds when you want, provided you put your state's share. I've been conscious about not denying the states funds for the projects for which money should go. Whether it's roadways, defence, railways, none of them have been reduced. And MGNREGA, the template has been the same. Give one amount in budget estimates and then review it in revised estimates, expand it in revised estimates if they want it based on demand.

You are one finance minister who has held onto fiscal consolidation and discipline. What is the philosophical underpinning that has made you stay committed to maintaining the fiscal consolidation pace?
It is essentially drawn from the honourable Prime Minister's experience in Gujarat. He has proven that developmental activity in the state or the necessary spending on health and education in the state are not mutually exclusive. You can still do it with clear money being managed responsibly.

There has been a massive step up in tax slabs giving substantial relief. There is an argument that tax slabs should be benchmarked to inflation. Is that feasible?
I don't know whether it is a question of feasibility. It is the wages and salaries which are normally pegged to inflation. And for that there are several institutional arrangements. For government employees there are pay commissions. There are indexes for workers which get periodically released. So, there are ways through which inflation, which should be factored in deciding wages, are already in place. But I'm not sure they include taxation.

The Economic Survey made a case for pushing investment in the private sector, as well as for less regulation of MSMEs, going so far as to say that the state should get out of the way of business. Do you think that the budget has taken that idea forward?
Haven't we taken that idea forward in the last at least four years when we removed archaic laws post-Covid. We also worked on reducing the number of compliances, decriminalisation, the Jan Vishwas bill, which had come earlier, and now with the second version aimed at removing the compliance burden and making sure laws are in tune with the modern-day requirement of being adaptable and easy for people to comply. We have used technology to stress on reducing compliance. From our side, we are very clear. To use the PM's words: minimum government, maximum governance. There is also a question now as to how much of the Centre's reforms are being reflected at the state level-as after all, industries set up anywhere deal with state laws. I would also want states to see how they can participate, if anything, through the 50-year interest-free capital expenditure money that we give. We've also brought in a segment of it for incentivising states to undertake reforms, so to enable greater reforms.

A high-level committee for non-financial sector regulations is proposed. But should there be a high-level committee to ensure deregulation in states as well?
The high-level committee we formed for non-financial institutions' regulations matters. Once it comes out with its recommendations, it will also show a template which states can take on board depending on the kind of things that they want to do with the regulators they have or with the rules they make.

FY25 growth is projected at 6.4%. Do you think India will be able to speed up its growth amid the weak global environment?
We would have to keep the activity going. We'll have to keep the emphasis clearly laid out and I don't think at this stage the global uncertainties are completely overwhelming us. We are conscious, we have to watch out for it. We are not the only ones in the global situation. While the rest of the world is, you know, doing something to take care of their interests, we'll have to take care of our interests. In this there are no friends and foes. We'll have to take care of interests, certainly, but at the same time see how best you can keep your talking channels alive. So that by talking only, are you going to be smoothening out any rough edges and keep the relationship with any country on an even keel. So that effort is definitely on and all of us are very clearly, with eyes wide open, watching this situation.

The budget has unveiled customs duty reforms with reductions in slabs and rates. Is that a signal that the country is open to the world, especially amid statements that India is a tariff king?
That's right! And, that is not just now. In the budget 2021-22 and 2022-23 and following data I said I want to review every duty which has been on and is active even now. And in this, anti-dumping duties, which are getting renewed every now and then, are also on my checklist. I must credit the CBIC (Central Board of Indirect Taxes and Customs) for it. They did a thorough review and took the stand that anti-dumping duties for protecting India's manufacturing interest cannot be evergreen. When their due date comes for ending and at that time, if there is a request for extension, it will not be done automatically. It will be reviewed and even if it has got to be done, they will be just done for every one year and then every March it will be reviewed. That was one position. The second position was if there is a duty to be brought in, it should be on the ground that we have capacity to produce, that dumping is going to cause damage for this growing industry. We need to protect it, but protect it for a time frame. It cannot be for perpetuity. That was the second. Third, duties cannot be levied just because there's pressure. But if there is a need for raw materials to come to this country because your MSMES are in a position today to quickly catch up with the global market, we should enable such imports so we cannot stonewall everything that comes to the country. Thorough examination by CBIC has helped us to completely minimise and take only those items where we need to have protection offered for Indian manufacturers. We have actually taken these steps consciously over the last two years. It's not any knee-jerk response to anything which is happening.

How do you view this characterisation of India as a tariff king by US President Donald Trump?
I have also heard others, whether it's the WTO (World Trade Organization) or many other country blocs which talk about India's stance. So, it is not because I've heard it from one source, but I've heard it from quite a few saying, can it not be a bit more reasonable? That's why I explained the policy which I have now taken out. I've heard it from several people. And there are countries which are in the FTA (Free Trade Agreement) mode with us, which send the same commodities under the FTA for nil tariff. Others feel that unless there is an FTA, they won't get that. If FTA can give that benefit, why are you not extending at least MFN (most favoured nation) to us? So, we have taken a position.

The budget has unveiled several measures. How do you see private investment in that context?
These (corporate investments) are commercial decisions. Irrespective of what happens, we are continuing our commitment on capital expenditure. Even this time we've increased some amount. We also want to rapidly make up for what couldn't happen in the first two quarters of 2024 (capex). We will continue our drive towards giving a larger multiplier to India's economy by investing in what you call public expenditure, on capital assets.

The rupee is stronger relative to other currencies but the slide against the dollar does cause pain. What do you have to say about that?
Text-bookish answer-this slide is also expected to help the exports, one. Second, it is not only India which is suffering. In fact, our Asian comparable counterparts, emerging market counterparts, are suffering even worse. The Indian rupee compared to our peers is functioning better and is less volatile compared to others when you're comparing it with the dollar. But as regards other currencies, I think we are strong and much stabler.

So that itself tells you that it is not because of any inherent weakness in our macroeconomic details. Macroeconomic fundamentals are absolutely sound, otherwise you would still not be growing as the fastest economy. But that should not bring in any sense of complacency in us. We will have to be careful. We'll have to ensure that this growth, if anything, goes up rather than, you know, remain sidewards.

You've spoken about financial sector regulations. Which are the areas to be addressed?
Each regulator has to do its own part. Each regulator has to be independent. Each regulator has to attend to his domain, but there can also be unintended friction points which can emerge between the decisions of one regulator and another. So, these are the kinds of things where we would certainly want to have an understanding and bring in a mechanism through which we can ensure that there is smoothness rather than, you know, I am doing my business, I am not wrong, but collaterals create a lot of heat.

One thing that's possibly dented sentiment is the way the markets have fallen of late and largely it's because of foreign money exiting.
More than just the domestic, I think the international situation is influencing every market. So, the bearish tendency is more based on the negatives or the downside risks of the global economy rather than our own. That said, I think markets are also seeing the possibility of calming down happening post the tariff war trigger. So, I would think it's largely on the global uncertainties rather than on India's own structural efficiencies or inefficiencies.

Trump has singled out India and Brazil repeatedly to characterise them as tariff kings...
Whether in response or not, in the last two years, as I said, we have done a lot of things to streamline our tariff structure and also drive it on a policy of supporting Atmanirbhar Bharat, but at the same time making sure that we don't allow flooding of goods into India. So, we've anyway initiated that measure in the last 2-3 years.

One of India's big successes has been services exports. Do you see a challenge in the AI environment and the geopolitics over immigration?
The market for or the world of services itself is evolving, and the requirements are also very different. Literally every year it changes and today much more than requiring people or personal movement, it is business which you can do from your own area and service them. So, our industry is adapting to this kind of a rapid change and their business models are also changing. The need outside is also very rapidly changing about what they expect in terms of software support, or their business is coming to India to set up the global capability centres and so on. I would think in this segment there's a lot of change and that changes for the good and Indian businesses in services sector grew on their own strength and reached global standards.

Public sector banks have been doing quite well, they've cleaned up NPAs. One phase of consolidation has taken place. Is there any thinking on another round to create more large banks?
There is no doubt India needs big banks, more banks. It's also an area in which a lot of private interest lies, a lot of private investment wants to come into setting up banks in India and that is something which Im sure the RBI will take a call on.

Is there any rethink on disinvestment and asset monetisation?
No, not at all. Asset monetisation, in fact, I've announced the second round of it and also given your target amount of ?10 lakh crore getting ploughed back into the system. So, asset monetisation, drawing on the successes of the earlier version, we brought in the second one.

On disinvestment and privatisation, which was very specifically undertaken and with the cabinet decision, there is just no rethink. Privatisation is a commitment given to the cabinet-we'll have to keep with it.

In the meantime, the valuations of these companies are something on which we have worked, brought in professional management and that is why many of them which were really lacking, have achieved such respectable numbers in the valuation. The listed ones are really doing well in the markets.

You have spoken about a new model framework for bilateral investment treaties (BITs).
I'll try to make it (the framework) as friendly as I can for the investors in the framework.

On privatisation of insurance, what is the thinking there?
It's part of the list which we have to do.

Is that something we can expect next financial year?
I've not given a timeframe for myself.

State insurers are the only ones probably in the entire public sector space that are still struggling...
We are spending a lot of time reviewing them, advising them. Some have turned around. A few are yet to come around. We will be working to get them on board -they should be professionally run and, like the banks, revive themselves.

What is the status of IDBI privatisation?
It should happen soon.

What is the story about the economy that is being missed that you would like to talk about?
It is not missing the story, it is not reporting. Media, because of its enthusiasm to sound neutral and put out both sides or multi sides on board, doesn't get the great side out. The real side being that the fundamentals are strong, the economy is well placed and the kind of responses which the government is giving periodically are timely and therefore growth is not at risk. It is (the economy) going to grow and it is going to grow for very many years.

The negative voices are political voices, they are not voices which understand the economy and we are doing a disservice to the economy by playing up the political voice which is completely and deliberately detaching itself from the economic reality because its politically suitable for them, such as jobless growth. Can growth sustain itself at this level consistently now for three years? Otherwise, are we saying that this country has already become AI driven, robotics driven? Have they automated so much that I can be jobless but grow at this level?

So, this narrator, happily giving our political argument, seems to attract more space rather than the space which has to be given for the other side of the story. In the process, we are allowing cynicism to run into the economy which is not going to do any good even if there are great policies from the government. Sentiments also eventually make up. If the sentiment is driven by a cynical campaign, it's going to hit us and all of us. That's why Sabka Prayas.

FIIs come to this country. FIIs go out of this country. It proves that you're booking your profits, and the economy's fundamentals are strong and therefore booking profit happens. They take it and then come back. But no, no FIIs are getting out of the country. It's gone. India is doomed. Why are we doomsayers? If the Prime Minister, in order to respect the taxpayers-in a country when 8 crore only file their returns and of that only 5 crore pay the tax-could take a bold step to say no income-tax up to ?12 lakh, do you think that is a statement coming from strength or coming from weakness? If I am depending on every rupee even from the lowest salary earners, you can tell me where I am. But today I am willing to let go. Does that not speak for the strength that we stand on?