'Some People Just Enjoy Rubbishing Me'

You have been talking about India becoming one of the fastest growing economies. What are these figures?
I was talking about the IMF statistics they circulated at the Ottawa development meeting. They pick up regional performers. In Asia, they picked China and India. At home, we're pilloried every day. Abroad, they ask us, how do you manage 4.5 per cent? Tell us your secret.

That's because you have raised our expectations. People now want 7 per cent...
That's one reason. The second is that we need over 7 per cent growth to fight poverty. In fact, I've said in Parliament that I'm happy people are unhappy with our performance. For the first time, people are demanding a high growth rate. It's a major change in mindset and we have to perform. But you should also recognise the factors beyond our control. I'm not responsible for the US recession.

But are you happy with the IMF estimate of 4.5 per cent?
One, I'm not necessarily subscribing to this rate. I'm not saying growth will be 4.5 per cent. Two, I'm also not hazarding any figure on my part. I'd like you to go back to the period when sanctions were imposed and the best that the people were giving this country was 4-4.5 per cent. But in 1998-99, we had 6.6 per cent. So much for projections! Growth was 5.2 per cent last year. We know the reasons for that. Now this year, while agriculture is doing better, industry and services are likely to go down. So the outlook remains depressed. We can at best try to aim for 5 per cent.

Why do you think India is faring better in the global recession than most Asian economies?
We are not so closely integrated into the global economy like them. This year, some of them are going into negative growth rates. Exports drive their economy but I'm convinced that agriculture drives the Indian economy. Much of the purchasing power comes from agriculture and allied activities. Seventy per cent of the people form the backbone of that power. Second, I don't mean it as a pat on our back, but the economy has certainly been better managed. Especially the external sector.

Do you mean the capital controls, like what we said after the Asian crisis?
It's not the lack of full capital convertibility but the faith and confidence of investors that has stood by us. We've been careful in managing the balance of payments. External debt is going down. Our short-term debt is a very small part of the total external debt, unlike the Asian economies where this has been the cause of their trouble. We've not allowed foreign investment in volatile areas like real estate. All these factors have contributed to the stability.

Does this vindicate our slow approach to reforms?
It's good that we've not exposed ourselves to global volatility. We've been cautious in opening up and we learned from the experience of countries like Japan. Sequencing of reforms is important.

How should we take advantage of this sudden stroke of luck?
Let me tell you we are very well regarded.So why haven't we got as much foreign investment as China or Brazil? That, I feel, is more a question of image. Most people are still not aware that we've made radical changes in our FDI policy, they think India is still a very difficult country to do business with. As India becomes more high-profile, these changes will get digested. The best regime for foreign investors is where you have no restrictions, don't have to deal with the government, and where there are no noises of democracy. India can't aspire to become that kind of regime. But we can certainly improve, we can become more hospitable by cutting down hassles. People have realised investment in India is profitable. Thomas Bata just visited me and he's planning to make India the hub of his Asian activities.

Are you satisfied with the pace of reforms?
That'll be a bad day when I'm satisfied. I'd like it to be much faster but I also have to learn to live in the real world, so I can at best push it as strongly as possible. I can't control it. I can't be disappointed or frustrated because one or two of the reform measures have not moved within the right timeframe. In our system, we need more time.

In a few months, you'll be presenting your fifth budget. Congratulations on that. But is your fourth one on course?
It is. The equity market problem or the general slowdown should not create the feeling that the budget has failed. I'm aware of what I can do by March and what I can't. But in response to what you said, I'll be the first non-Congress FM and one of few Indian FMs to present five budgets. When I compare this with the time when I had the distinction of being an FM who didn't present a budget, I feel that history has a way of coming full circle. When I look back, I have some satisfaction because I believe we've been able to steer the economy through a very difficult patch. Nothing has been easy in these four years—from sanctions to Kargil to WTC—it has been an exceptional time. We tend to forget the achievements, it's always the current that engrosses the mind.

What are the brightest achievements?
Telecom, equity markets, taxation reforms. In agriculture, Rs 30,000 crore advanced to kisan credit cards is a matter of pride. We've taken strong steps to control bank NPAs, it'd have been much larger otherwise, I assure you. Then, external management. Despite oil prices going up, we've managed to add $20 billion to our forex reserves in the last three-and-a-half years. On all these fronts, India is in the big league, not at the inconsequential margin of the comity of nations. I've been the first Indian to head the development committee of the World Bank and to address the Davos plenary last year. We're holding the G20 meeting next year. We're now thinking of moving millions out of poverty. If our poverty ratio has come down from 35 per cent to 26 per cent, it's a miracle and we should not undermine this achievement as a nation.

And what have you been most unhappy about?
Unhappy is putting it very mildly. Since the day I became finance minister, the feeling I've got is that some people just enjoy rubbishing me. And in the process, if they are rubbishing the country, they don't mind. But my most unhappy experience has been with UTI. I've said repeatedly that it isn't that I didn't know the critical situation in UTI but that I made repeated enquiries and I was always assured that things were fine. Should I still have taken the first flight to Mumbai, charged into the UTI office and told them to show all their papers? But the impression is that I'm a bungling, blundering fool who didn't know anything and neither had the courage to admit it.Also, what is ignored is that UTI is a problem of the stockmarkets. If the markets weren't in such turmoil, the problem would not have been so aggravated.

Don't you think the FIs' and banks' problem is also a direct fallout of the industrial stagnation?
I'm glad you asked this. In the wake of the UTI crisis, it's been made out as if all FIs are in bad shape and the government is bailing them out one after another.What are the facts? Last year the banks had huge VRS programmes, which impacted their balancesheets. Two, because of the industrial slowdown, FI and bank debts are not being serviced. But we haven't given a single penny to UTI. There is no bailout of idbi or Madhavpura Bank. The only bailout was of IFCI. That problem is of before my time. We don't dole out bailouts so easily. The weak banks were not created by me. We have recapitalised banks earlier. If we are the owners, we can't skip ownership responsibilities. I'm prepared to give up ownership of all banks but they don't want that. I'd like to tell you with all the responsibility at my command that these weak banks have dramatically improved their financial position because we put pressure on them. After UTI, we're closely monitoring FIs without day-to-day interference.

Why aren't we taking any urgent steps about the fiscal crisis?
We have to cut our coat according to our cloth. But our cloth is very small while the coat is getting huge.

So why aren't you cutting out subsidies?
There's no political will, no national consensus on cutting subsidies. The same money can be used to promote public goods like irrigation, infrastructure, but we can't seem to be doing it.

Is there a political consensus for a strict fiscal bill?
No.

Do you realise that your government is increasingly being seen as a soft government?
I don't see any reason for such a belief. Some day, when historians write an account of the present, they'll realise we dared into territories which were taboo. We may be talking softly but we've been taking hard decisions.