Impatiently patient to churn consensus

A wave of sweet incense greets you as you enter the Finance Minister''s cavernous room. As you cross to the other side to greet the minister, the fragrance fades and strains of Bach waft in. Clearly, Jaswant Singh has done up North Block to suit his style. There''s a new bronze Nataraj in the corridor and a Konarak wheel in the making. As always, Jaswant Singh is gracious, even if given to slight hyperbole. It''s an honour to meet all of you, he says. Considering that this is the first time he was formally meeting the press after taking over the ministry four months ago, it''s obvious he wasn''t quite missing us. We say so, but Singh protests. It''s only that I was getting a grip over things here and fashioning them to suit me. It''s policies and procedures he''s referring to (just in case you have confused it with Bach and incense sticks). Now that he is firmly in the saddle, and has taken as well as initiated several measures, he was meeting the press. There''s been no slack in reforms, he says, just the customary tugs and pulls of a functional democracy. In any case, too much was being read into the disinvestment issue, he adds, while listing the number of things that have been done, such as, the move to reform taxation, allow Indian nationals to hold forex accounts, restore the health of institutions. In the course of a free-wheeling interview, Mr Jaswant Singh goes through the gamut of issues â€” the Kelkar report, privatisation, compulsions of coalition politics, Lakshmi''s dislike of daridrya and so on. Excerpts from an exclusive conversation between the minister and The Economic Times : The last time we met, you''d just made the move from South Block to North Block. You''d said then that although it''s a short distance physically, it''s a different world altogether. Now that you''ve settled in, how does it feel? I worked for four years at the external affairs ministry. I''ve been in India''s public life for 30 plus years, 34 to be exact, and for me that assignment was most challenging. Exhilarating. And those four years were packed with one challenge after another. There''s much more of adrenaline flow in thos. Here, things are different, it''s not adrenaline that''s needed. What is needed here? I think you need great patience. You need a great sense of timing, of perseverance as things unravel at a slow pace. Security related issues move at high speed. Economy related ones have a much longer gestation period. You would realise, Sir, there''s a sense of impatience with the pace at which things are moving. There''s a general perception that reforms are flagging. Of course, you are entitled to your perception, but that is not justified. It is very difficult to speak in the first person singular. But if you look at the number of things that have been done in the past 90 days â€” 90 days, since in the first few weeks, I didn''t even have a staff â€” you won''t sustain the belief that reforms are flagging. For the first time in 50 years, we''ve put the entire plan for revamping the tax system up for public debate. For the first time, an Indian citizen can have a foreign exchange account. In these last 90 days, I had to concentrate on getting the system to work in harmony with my working style because I have to deal with the system. And till that process was complete, it was not possible for me to interact with the press. Now it''s time to start meeting the press, because it involves projecting what has been done. The perception must have grown because of the impasse on disinvestment. That perception is not shared. Because disinvestment is only one part of reform. Of course it''s an important part, an integral part of reform. The ministry remains fully committed to it. But, simultaneously, the Prime Minister is facing the situation of having to take the coalition along with him. These are the demands of democracy which cannot be abdicated. It''s not an impasse. It is a period in which a determination was made of the questions raised. It was time usefully spent. I spent time with officials, discussing how we should address the issue. I''ve also spent time with the minister, disinvestment and the secretary, disinvestment. And if you consider the experience of other countries in similar stages of disinvestment, you would not call this an impasse. Do you feel that the disinvestment process needs some fine-tuning? What is the ministry''s view on this? My ministry will share its view when we have a meeting on this. There are observations made, views expressed by various people, They have to be taken on board and resolved. While speaking, you''ve been referring to the problems in the past tense. Has the logjam been broken? I personally think there never was any logjam as such. What had happened was that there were views expressed that should have been... views expressed in the cabinet. If (different) views are expressed on disinvestment or on any other subject, why should that be seen as dissonance? It''s true that we''ve been used to uniformity of views. I''ll tell you why. Disinvestment has been debated long enough to achieve consonance. But now, there is difference of opinion not only within the coalition but within its dominant party. And the debate doesn''t culminate in the desired outcome of disinvestment. The problem is that these views got expressed in public. It''s only natural that in a party, in a coalition, issues are discussed. Issues need to be discussed. And while disinvestment is integral to reform, it is not the only part. For the first time in 50 years, the budgetary process is being thrown open, people are being asked to take part in it. I have here with me my mid-year review which I''ll be presenting to Parliament. As soon as I present it to Parliament, I''ll put it on the Net. This is also part of reform. The other vital thing that you''ve done is the Kelkar report on tax reform. It''s already become controversial. But isn''t that the whole purpose? Let me take you through this from the beginning. These are, in the first place, consultation papers, not final reports. They are genuinely meant for consultation so that whoever has a viewpoint to express, economic, political, gets a chance to express it. And the ministry benefits by diverse viewpoints. I think it''s a very good thing that there''s countrywide debate, a churning of ideas. There are three broad areas to these consultation papers. There is one, which is the most important, that deals with administrative reform and improvement of the entire tax administration system. The second deals with modernisation and computerisation. And the third deals with the tax part of it. Unfortunately, the first two parts, which are the most far-reaching have missed everybody''s observation. Somebody reported that I had not read the report. Someone else commented, just as well, because the report is meant for the dustbin. They miss the entire point. I said I had not read the report because I did not want to prejudge it. On outsourcing the work of the revenue department, we will move forward. On taxation, it is obvious that there will be disagreement amongst the taxpayers. The broader issue has become exemptions. All the economists say that exemptions must go. Okay, let''s test the idea. What we''re doing is testing an idea by putting it out and asking people what do you say about this. I think prejudging was the issue. This is not a consultation paper put out by any academic body. But you are prejudging the issue. Look at the composition of the panels that prepared the consultation papers. Other than Vijay Kelkar, everyone else we had on these panels is a non-official expert, every one of them. Because the panels are headed by Dr Kelkar, your economic advisor, their proposals are seen to carry the operational intent of being converted into budget proposals. So, when you find members of the government dismissing the reports as mere consultation papers, that creates confusion. But that''s what it exactly is. It is a consultation paper, not a definitive report of the government. And if someone says that it''s only a consultation paper, that someone is only repeating what these papers say about themselves. In the light of the reactions, have you formed any views? Not at all. I really still do not want to judge issues till the debate is over and all the views are available , although certain things are pretty clear to me. Mr Advani, in an interview, said that there are a few things that Mr Jaswant Singh disagrees with.. That was a private conversation. I''ll tell you what I think, and it''s not because of what Mr Advani says. For example, if the government gives a commitment that if you invest in infrastructure, you''ll get a 10 year benefit on taxation, I can''t come in two years afterwards and say that I''m withdrawing that benefit. Are you referring Sir, to housing ? I''m also referrin4 to the housing issue. I have said this elsewhere as well that there are certain sectors that will require a leg-up and encouragement. Those that are employment-generating, are immediately beneficial, for example, housing, tourism. If there is anything in the consultation papers to the contrary, it''s very clear (what our response would be). Can we conclude that even if some of these concessions are withdrawn, they would be withdrawn prospectively? How can they be withdrawn retrospectively? Or even prospectively, which ones should go, in what phases, all these are issues that my revenue department would go into. Is there a roadmap as to when these consultations would take place? Of course, I''ll tell you. The consultations are now on. Till December 1, inputs come from all over the country. The task forces are travelling, addressing assemblies, answering queries, absorbing views. All this is part of the process of consultation. Even though I say it myself, I think it is a very good thing. Of course, it is. It is a very good thing, we are holding substantive consultations instead of calling these endless boring meetings, in which a lot of people come, yawn, half-doze and sit here, and go on for one hour, two hours at a time. This is a consultation process that goes on for three weeks on what is most central, of most direct importance to the citizen. And after that is over, around the first of December, the consultation process would have been on for three weeks. I know what is going to happen. A clamour will be raised: give us more time. The door is not shut, but an assessment will have to be made. An analysis must start as to what is doable, what is not doable, what are the consequences. That is the process that will start then. For that also, I''ve given a time period. Revenue will begin by the end of the first week of December. That will take some three-four weeks to bring out the final product. So, by the new year, you think the proposals would be finalised. I won''t be able to devote so much time during the Parliament session. By the beginning of December, all the inputs would be in and then would begin a process that, in rural parlance, would be called churning. None of you is probably familiar with this, but how do you make butter? You don''t make butter in a mixie. You make butter by mixing yoghurt with water and churning it in a pot. They use a washing machine for the purpose in some places. (Laughs) Then they''ll have to wash the washing machine. Apparently that is why washing machines sell so well in Punjab... Another reason why there is this perception that reforms are flagging is the stalling of legislation. Session after session, things like the Electricity Bill languish. You have 21 bills, I think, which have to come up in the current session â€” 22 days and 21 bills, that is the situation. I know the situation. And I have prioritised. The real lag has taken place in the last two sessions of Parliament, with regard to legislative work, particularly the Monsoon session. I''ve already worked out my priorities. I have had the benefit of sitting with the leader of the Opposition. These (the economic bills pending before Parliament) are not really politically volatile or confrontationist in the normal course. Parliament, however, is sovereign. Then, there are the standing committees. Bills get stuck in standing committees, for 18 months, 24 months. I have to abide by the procedures of Parliament. I cannot shortcut them. I cannot bully Parliament. The whole aspect of Parliamentary life is persuasion and consultation. For that there has to be discussion (in the House). Without discussion, legislation cannot take place. Which are the bills high up in your list of priorities? I have my list of priorities. I have how many working days? Out of 22, take out 4 for private members'' bills. That leaves 18. Out of 18 working days, each will, at most, to be optimistic, give financial matters four hours of work. It would be overambitious on my part to think that I would be able to persuade everyone every day to take up financial matters. The maximum I can achieve, which I am aiming for, is nine days. That gives us 36 hours. To an outside observer, it is easy to say that a session of Parliament has passed with so little legislation undertaken and that observation would be correct as well. But there are limits, restraints of Parliamentary life. It is within these limits that I have to implement my priorities. If all goes well, on Monday itself, I hope to get two bills through. Which are these? The bill on securitisation and,.. let us see. The bill on securitisation is very important. The courts have given a stay on the Ordinance. It''s not really a stay on the Ordinance. I''m not really bothered by the courts. The bill has really altered the atmosphere. People have the feeling that we''re now moving forward on this (lenders'' rights). And simultaneously â€” on Monday, I''ll be making some more announcements â€” I don''t want to pre-empt (an announcement in Parliament) or they will say, Off with his head! Another thing that has got stuck, or at least that''s how it appears, is the proposal of the NK Singh committee on foreign investment. It has not got stuck. What has regrettably happened with it is that Maran, whose ministry deals with it, has sadly fallen ill. We fixed a date, we had already circulated the proposals, the ministries were to send their responses, which Mr Maran''s ministry were to analyse. We had even fixed a meeting for September 28. We took it so seriously, our position is quite clear on this. This will now get untangled, but this delay has been made by the hand of god, what else can one say? What are your views on these recommendations? I am part of the group of ministers on the subject. Until the group has made up its mind, if I give my opinion, you''ll say dissension. It is better that I have the report of the group of ministers submitted before (I speak about it). What would your overall response be? My overall response is cautious. (laughs). Generally speaking, the tide seems to be turning. Interest rates are softer, 10 year paper is going at 6.4%, manufacturing has picked up in September, how do you take advantage of the situation? I''m not King Canute, when you say the tide is turning. There must be recognition that the last six months have witnessed probably the most adverse combination of circumstances that India could have had. Of these months, I''ve been around for 90 plus days. We had a stand-off in the west, we had the most severe drought in decades, the global upturn that had been expected did not materialise, there are recessionary trends in Germany, Japan has not picked up and, as Greenspan has said, there are weak spots in the US recovery. Plus, we have the geopolitical uncertainty, on account of Iraq, the Gulf, West Asia. Despite that, and to me this is the most potent expression of the inherent strength and resilience of the Indian economy, (the economy has done reasonably well.) If I can push this, it must be done, to encourage sectors that are moving. Industrial production has picked up, exports have picked up, imports have also gone up, the current account is in surplus. What requires a helping hand must get a helping hand. Steel, textiles. What kind of support would you give textiles? Why don''t you wait till February? I''ll be putting out ideas on how to deal with sickness in its totality on the Net. If something can be done even before the Budget, why not? How about structural problems like restricted bank lending. As a proportion of GDP, it is around 120% in the US, of the same order in China and Korea. In India, it''s 45%. Banks don''t lend. How do we tackle this? One thing that has to be done is to remove the climate of distrust and inhibition in banking. You have to restore confidence. I can''t tell the bank manager that I''ll slit his throat if he doesn''t lend. But you can reward him if he does. Yes, we can. I am thinking of a great many things. Alongside the Securitisation bill, we need â€” and here I''m saying that I was planning to announce only on Monday â€” we need a lenders'' responsibility legislation also. If you''ve borrowed, you''re obliged to repay. But it gets tangled in all kinds of (obstructions). I must tackle that. But also, lenders must have a continuous responsibility towards the borrower which goes beyond recovery. That does not exist now. There must be a balance. There are tough reforms ahead. Labour reform, power reform, getting people to pay for infrastructure services. Do you think these are beyond the capabilities of a coalition? Not at all. You must appreciate that India itself is a coalition. I often tell my friends of the European Union, your experiment we have demonstrated with success for the past 50 years. This is a continent-sized country. It is a coalition of colours. How can you move away from treating it as a coalition in which you have to take everyone along? Uniformity at the political level that we had in the past is now gone, never really to come back again. Don''t you yourself feel impatient at times? Of course, I feel impatient. But democracy is a testing, scruffy business. It demands commitment to consensus. Impatience should motivate you to greater consensus building. In the packages for UTI, IDBI, etc, the state discharged its role as the ultimate arbiter of risk. But, it seems, at the expense of fiscal responsibility. Where do you strike a balance? Your question assumes that in what we have done for UTI and IDBI and what will be done for IFCI, we have been fiscally profligate. Not at all. In fact, what we''re doing is not a bail-out. It is a fencing in of the liabilities. What we have done is to split the Unit Trust into that which I believe the government must stand by because it has given its word. For pensioners, aged people, US 64 was as good as the Reserve Bank , because of government backing. Then, it goes for a tumble. Can the government say then that it wants to do nothing with it? So we fence it in, create Unit II which is Net Asset Value based, to be managed professionally by people you hire from the market, to operate on a commercial basis. You say that I''m fiscally profligate. If I allow this disease to fester, the problem would be infinitely and much more directly detrimental to my fisc. In the last two months (inflows into) the Unit Trust have turned positive, almost by Rs 3,000 crore. If this trend continues, the Unit Trust will come back to what it was. There would be certain issues where I would not be able to help. They will have to sink. IDBI will not have to sink. If we take timely action, which has been done by repeal of the IDBI Act, it will turn into a bank without the burden of SLR and priority lending. Do this for five years, come back to financial health. In the case of IFCI, problems have to be squarely addressed. Where people have to take a haircut, they have to take a haircut.

Impatiently patient to churn consensus

Now that Jaswant Singh is firmly in the saddle, and has taken as well as initiated several measures, he was meeting the press. There's been no slack in reforms, he says, just the customary tugs and pulls of a functional democracy. In the course of...

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