Click to play videoDid the Government get the interim budget wrong and is it now contradicting its self-making corrections? These are the questions Karan Thapar asked Union Minister for Commerce and Industry Kamal Nath.
Karan Thapar: Minister, when on Monday the acting Finance Minister presented the interim budget in Parliament, he announced that he couldn't come up with the stimulus package for the economy because constitutional proprieties wouldn't let him.
Yet on Thursday, while speaking in the Rajya Sabha, he said that he could very possibly do exactly that at the end of the Budget debate. So, in three days flat, has the acting Finance Minister contradicted himself and done a complete U-turn?
Kamal Nath: Not at all. Let us look at the first part: the propriety issue. The constraints are proprieties, as you said it is an interim budget. Now a budget is for 12 months and we are not a government until the elections are over.
Karan Thapar: Can I say this that if it is a propriety issue on Monday then how come the propriety issue doesn't continue on Thursday. In fact, if there is a need for stimulus for the economy on Thursday, how come that was not realised on Monday?
Kamal Nath: I think you got it wrong. What he said in Rajya Sabha is he can make the announcements and I think when he is going to reply to the budget debate he is going to announce that these are the things the Government agrees to but he is leaving it for the next government to implement.
There are certain things which require legislative approval and at this point of time we don't want to get into anything which requires legislative approval.
Karan Thapar: Let me point out to what he said in the Rajya Sabha on Thursday. He said: "I do hope that while replying to the debate on the budget I may be in a position to indicate more detailed information".
Every single newspaper in the country has interpreted him to be saying that he would come up with the stimulus package on the end of the budget debate. That is a clear contradiction to what he said on Monday.
Kamal Nath: It is not a contradiction. The contradiction is in what you read. If you read something wrongly and understand something wrongly it is no contradiction.
Karan Thapar: Sir, the contradiction is in what he said and the Business Standard makes it clear; their front page headline suggests it.
Kamal Nath: Well, this is going to come to an end in next couple of days and you will know that there was no contradiction. What he said is correct that he can reply and can explain which he will do. That doesn't mean that he is going to present another budget when he is going to reply at the end of the budget debate.
Karan Thapar: It is not just that the Finance Minister in three days has contradicted himself but unfortunately he also ended up contradicting the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia.
Twenty-four hours after the interim budget, Mr Montek Singh Ahluwalia, told me that there was no need for the Government to do more and that the absorptive capacity of the economy couldn't take more. Now, if the Finance Minister is going to announce in two days time that he is doing more, he is contradicting the Deputy Chairman.
Kamal Nath: How are you imagining he is going to announce more?
Karan Thapar: He said so.
Kamal Nath: He didn't say so. His words are very clear and crisp. He says, "I will clarify, I will explain", which he will do and that is what exactly I am saying.
Karan Thapar: Lets go back to his precise words. What he said on Thursday and I am almost quoting him now: "Is that the economy has yet not sailed the full slowdown that is going to come India's way".
If that is really the case and he is saying it then I put it to you that it was irresponsible of him to not to have announced measures to protect the economy on Monday itself. Because if the slowdown hasn't completed and if it is going to get worse you need to act now and by not acting he has left the economy unprotected.
Kamal Nath: We have already acted. We saw this two months ago and that is why today our steel, cement, car, FMCG (Fast Moving Consumer Goods) sector's figures are up. From what you are saying is seen today was seen by us three months ago.
Today economies are not inter-dependent; today financial systems are not inter-dependent but are inter-connected. So, when we are seeing a further slidedown in Europe and United States, we don't know the quantum of slowdown.
Karan Thapar: But again to the contradictions, that is what the Finance Minister said on Thursday: "all measures necessary to boost the economy will be taken. The support that the Indian economy requires will be given".
Yet what Montek Singh Ahluwalia said 24 hours after the budget was that no more measures are needed. In fact, he said that the absorptive capacity of the economy can't take further measures. These are contradictory.
Kamal Nath: They are not contradictory. If Montek says certain things cannot be done, the Finance Minister has not done those. So, first your question is why has he not done it and the second point you making is that when Montek says it cannot be done so why is he saying he has not done it.
So it is explaining it straight away, I mean both the statements explain what the Finance Minister has done.
Karan Thapar: Except of the fact that when you look at the economic papers, the front page headline of the Business Standard is: ‘Another stimulus package coming’.
Are you saying that the newspapers, the Members of Parliament, the people of the country, have understood one thing and you have understood something else?
Kamal Nath: No, the papers have said what they wanted to say. If they say it is coming do you want the Finance Minister to agree to what they are saying? They may be saying anything.
Karan Thapar: They are quoting him.
Kamal Nath: They are not quoting him saying that a stimulus package is coming. We have never said that.
Karan Thapar: He has said that he will be meeting the officials of the Financial Ministry and the RBI to work out that what further steps are needed. That is so different to saying on Monday that constitutional propriety would not let him act and that is so different to Montek Singh Ahluwalia saying that there is no need to act.
Kamal Nath: Propriety was there on Monday, it was there on the previous Monday.
Karan Thapar: But it has disappeared by Thursday.
Kamal Nath: No, it has not. Meeting officials doesn't mean that you are meeting them to announce a package.
Karan Thapar: Why is he meeting them for, to have a cup of tea and a general chat?
Kamal Nath: What do you think a budget is? A budget is expenditure, a budget is to calculate fiscal deficit and you meet officers for that.
Karan Thapar: But if he is telling Members of Parliament that he is meeting officers and the RBI to work out what he is going to do and if he then goes on to say "all measures necessary to boost the economy will be taken" that is a clear sign that more is coming. And it is a clear contradiction to the position he took on Monday and Montek Singh Ahluwalia's position on Tuesday.
Kamal Nath: I don't know Montek Singh Ahluwalia's position but I do know that what is needed to be done has been done. There is no end to what needs to be done.
Karan Thapar: Let me approach this thing a little differently. Already unemployment is rising, the manufacture and production is shrinking and export growth is declining.
Are you saying to me that over the next three months all these problems will remain as they are or possibly get better or you saying that over the next three months there are chances that they deteriorate? Because if they deteriorate, then you need to take an action now to protect yourself. It is only if the things remain the same or improve that you don't need to act.
Kamal Nath: Please get one thing clear, the Government of India can do nothing to save US economy.
Karan Thapar: I am talking about the Indian economy.
Kamal Nath: Let me finish. If there is a contraction of demand in their countries and my exports are going down, what are you suppose to do?
Karan Thapar: It is when your joblessness is rising. When your exports go down, the joblessness rises further. Your production is falling, your manufacturing is falling. These are the areas that are crying out for your assistance; FICCI has asked for it, then why are you not acting?
Kamal Nath: If you expect the Government of India to create demand in Europe and US, please tell me how the Government of India do it?
Karan Thapar: I am talking about creating demand in India.
Kamal Nath: Okay, what is the stimulus package all about. You are talking about foreign exports. Now our exports fall because of the contraction of demand there.
You are saying what you are doing about fall in exports. Now when you talk about fall in exports you talk about contraction of demand in those countries.
Karan Thapar: I am talking about real estate, automobiles, whole lost of other sectors, like steel, cement. I am talking about demand in India.
Kamal Nath: Karan, if you are talking about these sectors then today in newspapers it shows that steel is a few percentage better than the last year. It had two bad months: October and November. The automobile sector has also shown a growth rate. So, whatever sectors you are talking about are the sectors which have now recovered after the stimulus package.
Karan Thapar: If the sectors have improved, then why the Finance Minister is meeting people to decide what to do more. This is the first contradiction. Secondly, the sectors have only improved year on year. They haven't really shown up a proper uphill that suggests that you are out of the woods.
Kamal Nath: Because of the global economic stress you cannot be out of the woods. The question is that how are you going to address it and you address it by stimulating domestic demand and we have done that.
Karan Thapar: You know the question really is that the people are saying that the difference between Monday and Thursday is that the Government panicked because of the response from the press, the opposition and from industry or the Government is confused. Why the panic or you are confused by your own analysis of the economy, which one is true?
Kamal Nath: I don't think there is any panic or pressure. We had inter-departmental and inter-ministerial meetings and we realised that there were constraints or proprieties.
You cannot start announcing and committing a government. Today (had) we have announced something, the opposition and the press would have been at us that you are a Government for the next three months then why are you announcing this.
Karan Thapar: Why are you going around, sir? If there were proprieties and constraints that stopped you on Monday, they will stop you on Thursday but what the Finance Minister is saying that next week he may be in a position to announce something.
Kamal Nath: Then why don't you wait for the next week?
Karan Thapar: You can't have constraints on day one and not on day two.
Kamal Nath: He has not said that he will announce anything. Has he said that?
Karan Thapar: Yes. "I do hope that while replying to the debate on the budget, I am in a positon to indicate some more detailed information about what I am going to do" (From the Business Stardard).
Kamal Nath: You are half reading the sentence, please read the full sentence.
Karan Thapar: I have read it. And then he adds (from the Business Standard) "all measure necessary to boost the economy will be taken and he adds that the support that the Indian economy requires will be given".
But on Monday he had constraints that stopped him by Thursday he doesn't, is this panic or confusion?
Kamal Nath: Karan, the only thing which will satisfy you is wait for three days and you'll find there is no contradiction. You are reading between lines of different newspapers and swinging it around.
Karan Thapar: I am reading from the front page of the Business Standard.
Kamal Nath: Then, you should read the front page of The Times of India today and that will tell you categorically.
Karan Thapar: A small uptake doesn't reflect much. That is why I am telling you that don't see too much of hope.
Kamal Nath: Well, I am seeing hope because I am more on the ground on this. I am not reading just newspapers and making comments.
Karan Thapar: Beyond the economics, the people on Monday were saying that the Government is bit like a doctor who knows the patient seriously, has diagnosed what the problem is, knows what medicine is required but inexplicably doesn't want to administer the medicine for three more months because it thinks that some other doctor should do it.
Kamal Nath: Well, we are a Government and we know what the problem is and we will administer the medicine for three months. And your point is that why aren't you administering the medicine for 12 months. That is the difference.
Karan Thapar: That is what the image was on Monday. You know what the image on Thursday was, forgive me if I sound brutal and rude, but the image was of a quack who doesn't know what he is diagnosing, isn't sure of his remedy and is misleading the country.
Kamal Nath: I think you got it all wrong. On Thursday, what you are reading and what he is saying is all incorrect. You wait for few more days and you'll know that there is complete consistency.
Karan Thapar: Right, we would have the answer to this on Monday or Tuesday or certainly by February 26.
Minister, now lets talk about 2009 and 2010. If you look at the budget's figures that the acting Finance Minister presented, it seems the Government is expecting a 7 per cent growth in the GDP but the IMF and the World Bank have said that India is likely to see nothing more than 5 or 5.5 per cent, that is a huge difference. How confident are you about your 7 per cent assumption?
Kamal Nath: We are very confident because we must understand fundamentals. If we look at what the IMF has said 25 years ago or even 10 year ago or what the World Bank has said 10 or 20 years ago; we know what they said. So, we are confident about what we are saying. And, when we talk of this we talk with the fundamentals of Indian economy.
Karan Thapar: So, you are saying you are confident about the 7 per cent growth in 2009-2010?
Kamal Nath: As on date.
Karan Thapar: As on date?
Kamal Nath: Yes, of course. If there is a further slidedown in the global economy or there is a further deterioration in Europe or if Japan goes down and there is more turmoil, well then it would be different.
Karan Thapar: Lets come to the conditions that you are laying down in a moments of time. First come to what you said that as of now. You are very confident that the economy can achieve 7 per cent growth.
The problem is that if you look further at your own budget figures, you are only expecting an increase in the customs and excise revenue of 2 per cent and you are just about expecting an increase in the service tax revenue of 6 per cent. This does not add up to the 7 per cent GDP growth, so what sought of confidence is this?
Kamal Nath: We are going to have agricultural sector growth, manufacturing sector growth, services sector growth; it is all these compounded together. It does not depend on custom and excise. Those facts are wrong.
Karan Thapar: Oh, the facts are wrong. They are from your budget.
Kamal Nath: Using these facts for GDP is wrong.
Karan Thapar: Just a moment. You are relying on manufacturing sector for GDP growth, it shrank by 2 per cent in December.
Kamal Nath: That is why we saying 7 per cent.
Karan Thapar: Agriculture has shrunk from an average of 3.75 per cent per year for the last three years to 2.4-2.5 per cent. So, the growth you are relying upon does not exist.
Kamal Nath: You compound these. There is a way of calculating GDP.
Karan Thapar: You can't compound growth when it does not exist.
Kamal Nath: There is growth otherwise we can talk about 10 per cent growth.
Karan Thapar: But it is shrinking not expanding.
Kamal Nath: Please remember if we stuck to the same growth as last year we would have had a 10 per cent growth. Because we are not at that and because it has been shrinking we are talking about the 7 per cent growth.
Karan Thapar: Let me put something else which is of major concern to the country. You are confident that you can achieve growth but your budget figure seem to suggest that there is some internal miscalculation, keep that aside as time will sort it out.
Second area of concern for the next year is the fiscal deficit that you ended up with. The Finance Minister announced it was 6 per cent, the truth is that if you add your off budget special securities i.e. the oil and fertilizer it comes to 7.8 per cent, if you add state deficits it comes somewhere around 11-12 per cent. Why can't you be more honest about it that it gives confidence to the people?
Kamal Nath: Where have you got these figures from? You haven't got them surreptitiously, these are all open figures so what do you mean by being honest?
Karan Thapar: The figure given by the Finance Minister in the interim budget was 6 per cent which isn't the truth. The truth is 7.8 per cent.
Kamal Nath: These all figures are known, these figures have a weighted average. There is a fiscal deficit; we plan it from 2.5 to 3 per cent. The fiscal deficit has gone up because we had greater spendings. In any economic slowdown you do that.
Karan Thapar: But it has gone up more than you admit, that is the problem.
Kamal Nath: No, we have. Why would we not admit it when the figures are out. How do you know the figures?
Karan Thapar: Let me answer your question. Montek Singh Ahluwalia in an interview himself has accepted this that in fact it would have been better if the Government would have accepted that the fiscal deficit is not 6, as the Finance Minister said, but 7.8. There is already in what you are accepting in public a difference of almost a 2 per cent.
Kamal Nath: You must understand that what we are talking about is a fiscal deficit of the previous year.
Karan Thapar: That is what even I am talking about.
Kamal Nath: No. If you say what is a fiscal deficit April onwards it could be eight or nine per cent.
Karan Thapar: But, I am not talking about it.
Kamal Nath: We are not projecting a fiscal deficit of 6 per cent for the following year.
Karan Thapar: Minister, I am not talking about fiscal deficit for next year. I am talking about this year and I am saying that you are fudging this year's fiscal deficit.
Kamal Nath: You know figures which are public and figures which we have given to the public, we are now miscalculating it. Are you suggesting this?
Karan Thapar: I am suggesting that there is a difference between what the Finance Minister said in his budget speech where he said that there the deficit in the last year was 6 per cent and what you can find out when you look at the budget figures which show that if you take on board, which you have to, the special securities for oil and fertilizers the actual deficit is 7.8 per cent.
This is the first difference. There is also a second difference, even more worrying that the Prime Minister's Economic Advisory Council in January said that the deficit was over 8 per cent. So again there is a difference as a result of which people say are they fudging the deficit? Are they worried of its size, what is the explanation?
Kamal Nath: Well, you must learn to read figures and the way you learn to read figures you get to know that this is related to the previous months and that is what relates to the future months.
If you ask me that is what is going to be the fiscal deficit in the next 12 months, I will tell you that it is not going to be 6 per cent, it is going to be more. But if you ask me what is your fiscal deficit today I will tell you 6 per cent.
Karan Thapar: Minister, you can accuse me of reading the wrong figures and misunderstanding them. That may be your way out of this problem but the truth is that the people who actually know that there is a bit of fudging going on won't be reassured by your answer.
Kamal Nath: What do you mean by fudging when you say that you got these figures from Finance Minister's papers only. Where is the fudging in it?
Karan Thapar: The difference comes in what he says in his speech and what you have to glean from his figures.
Kamal Nath: See, the figures and the speech have to be taken together and they are right because if you ask it depends what you reading. Now, if you are reading and adding correctly because when you are talking about fertilizer subsidy you know that it the fertilizer subsidy and this will add up to what on March 31.
Karan Thapar: Alright, what you are saying I will accept it. You are saying that the Finance Minister just made it a bit difficult for everyone to understand. He is actually requiring people to dig through the figures to try and get the true situation and not go by what he says.
Kamal Nath: The Finance Minister said the right thing but some people who cannot understand the way these are portrayed will never understand.
Karan Thapar: Alright Minister, I leave the last word with you. It was a pleasure talking to you on Devil's Advocate.
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