‘India will be the world’s third largest economy in Modi’s 3rd term’: Sitharaman

Two days after presenting her sixth budget, an interim one ahead of the 2024 national elections this summer, Union finance minister Nirmala Sitharaman sat down with journalists from Hindustan Times and Mint to discuss various aspects of the interim budget, and the state of the economy.

Referring to the four caste groups she mentioned in her speech on Thursday — women, young people, farmers, and the poor — and repeatedly evoking the narrative of a Viksit Bharat (developed India) by 2047, the finance minister spoke about her government’s immediate and long-term priorities.
Criticising the United Progressive Alliance for wasting a decade (2004-14), acknowledging the challenge of Covid-19, where India steered clear of the playbook of western economies that were pumping cash into the system and, instead, launched a large campaign built around enterprise and self-reliance, and speaking of the clear-headed leadership of Prime Minister Narendra Modi, Sitharaman answered a range of questions about the budget as well as the economy.
Edited excerpts:
The Prime Minister has already said that in the third term we will become the world’s third largest economy. So, everything that is required to do so that we reach the third biggest economy level, will be done. That’s the third term. But you may want to add that the second term saw a pandemic like was never seen before. Despite that, with reforms and with every inclusive measure the economy has been brought to the level of fifth largest (now).
It’s also a reflection of the economy actually going through a lot of shifts, changes, the paradigms are themselves being challenged. I take a very simple example; rural workers move to urban areas and during critical seasons [sowing or harvesting] they go back to their villages. Now, since post-Covid, many of those who had been in the urban areas and acquired some kind of skills — each at his or her own level — are saying that the rural areas are giving them [similar] opportunities to utilise and monetise their skills. Many of them have not even returned [to urban centres]. If that is happening, are we able to measure that? Are we able to take into account such changes? So, I think we are at a very, very transitory stage.
You have to address the unemployment issue, no doubt. But, do you think jobs are only there? First of all, AI also requires human intervention. It is not going to operate on its own. Second, on investment; it has to happen and if it brings jobs together, it’s very well. But at least when investment comes, as you say, it may not give many jobs, but those (businesses) are getting located in an area. They are going to create indirect jobs as well. So, it is a layered debate. You want investment, you want jobs, and then you want meaningful jobs, and then you want rewarding, highly rewarding jobs. These are layers to be addressed.
We need to have a lot more comprehensive and credible data which captures these kind of changes. One improvement in the labour force surveys, which is coming out of the labour department. I think it’s a vastly improved version. Which gives you a fairly good picture, but again that is only formal sector labour. We have not captured the informal sector yet. So yes, I agree the requirement for credible, comprehensive data can never be overestimated.
That’s why I’m saying now agriculture and related activities are themselves seeing a lot of significant adaptation to changing methods and practices. The activities of Common Service Centres (CSCs), which we established, are now seeing more mails and courier entries. Post offices in the rural areas are doing courier entries. People are sending products out, samples out. So, I think, we are at a wonderful stage, the cusp of a big shift in the way in which agriculture, the rural economy, is operating.
But equally, we’ll also have to notice that in some states it is being targeted as one of the resources coming from the Centre, nevertheless. The CAG has pointed this out. We need to understand what actually is happening on the ground on MNREGA. We’ll never deny even one penny. If it is required, yes you will get it. But, who explains the malpractice? Who explains to you that people who don’t even exist are getting the job cards. So, we need to be clear, if we are using these as indicators to measure economic activity, you can’t equally tell me that MNREGA demand is going up and at the same time tell me that rural demand is in some cases increasing and in some cases not increasing.
The media, in the last press conference, asked me why is the growth in capex tapering? Meaning, are you slowly reducing the capex commitment? I gave a factual answer that it was proportionately increased on a higher base… 11% [more] from a higher base. 11% is quite big, to ₹11.11 lakh crore… 3.4% of GDP.
Again, this whole thought of new projects, sunrise sectors, where newer markets are available, where the world is shifting towards something like renewable energy, where incentives like PLI [Production Linked Incentive] are being offered…; so, the investments are coming into those areas. There’s a clear sign of that. Private sector’s investment now, you can see in all these areas. But if you search only in cement and old steel factories, no.
Of course, we did. We didn’t allow Covid to pull us down in such a manner that we couldn’t continue with reforms. Reforms were announced along with Covid measures.
“Atmanirbhar Bharat” (Self-reliant India) announcements happened during 2020, in the critical period when lockdowns were still on. We continued with reforms during Covid-19. Today, unlike economies elsewhere, it [the Indian economy] is seeing sustained growth. We are on the top of the growth curve.
We’ll have to tell them, we’ll have to work with them, to say that this is for bringing great activity into your economy, it is going to help India to grow faster. We will engage with them.
You’re talking about the period when we had Covid. We had just given the tax concessions then, reduced the tax [rates]. And the banks themselves were coming out of the twin balance sheet problem, which we inherited. So, how many asks would you have of an industry which lived through that period? So, I think, the debate will now have to be, now that they have come out of the twin balance sheet problem, now that banks have also come out of their twin balance sheet problem… Now, what? Rather, in 2019, you got a corporate tax reduction? Or that the twin balance sheet problem was (back in) 2014. It cannot be answered like that. It took this many number of years for them to come out of these issues.

I have to talk politics. Ten glorious years were lost because of the corrupt practices. I would request the media not to underplay those decisions, the policy paralysis, the mismanagement, the way in which inflation was allowed to run rampant, and then the ‘bhai-bhatijawad’ [nepotism].
All of them left such strong imprints of the Indian economy that companies couldn’t come out of it. Along with that, they dragged the banks down. Along with that, jobs were lost. Along with that, investors ran away from this country, saying we cannot do business here. It took us all these years to get that sorted out. Banks are now making profits. Companies have cleaned up their balance sheets. Today, they are able to think in terms of newer investment. We’ve given them this tax concession; newer areas, sunrise sectors are coming up.
By 2019 itself, we had amalgamated merged banks to make them big. I quite agree with you that we need bigger, larger banks, we need more of SBI-sized banks in India.
Actually, since a couple of years ago, there’s been a lot of work together with the RBI and Sebi in creating such an environment. And also bringing in more asset managers into this country. To deepen the bond market, I’ve had conversations with Sebi. They’re doing quite a lot. The RBI itself has come up with its own understanding of how both for government securities and private securities, private borrowing will be able to have a wider market. They’ve created some kind of platforms through which people can access large (sums). So there’s a lot of work which has happened. I think this JP Morgan listing (India will, from June 2024, be part of JP Morgan’s Government Bond Index-Emerging Markets) is also something which is going to give us access to cheaper, easier money. Because once you’re listed, it’s almost as if automatically, the money comes in.
We don’t know yet. Some people want [it], some people have not asked. Government has not taken a call. Let’s see.
Of the given PLIs, I think some of them have performed very well. Some others are alright. A few are yet to take off.