Finance Minister Nirmala Sitharaman, in an exclusive interview to Network18, said the government is focusing on infrastructure building and increasing capital expenditure in the health sector as these segments have a multiplier effect on the economy.
Earlier in the day, Sitharaman presented the Union Budget 2021-22 in Parliament, against the backdrop of unprecedented health crisis and external aggression from China.
“If I had more resources to give, I would have given it to the people as much as we can,” Sitharaman told Rahul Joshi, Group Editor-in-Chief and MD of Network18.
Speaking about the incentives announced during the course of the pandemic, the finance minister said: “The question of giving money to people to spend also had the question whether people will spend or keep it aside for rainy days.”
Public spending will result in immediate demand revival only if people spend money. Unless the spending happens in those sectors where the multiplier effect will work, there is no point in spending, especially in areas where the multipliers are weak. That is why we have taken the route of building infrastructure and capex in the health sector, she noted.
“I certainly didn’t want to fund the whole operation through taxation by increasing the tax. I have made a provision for large borrowings with tax buoyancy at a conservative level and with disinvestment and asset monetisation and improved GST collections,” she added.
Commenting on the infusion of Rs 20,000 crore into public sector banks, Sitharaman said: “We need more public sector banks which are functionally strong, efficient and professionally managed and which can manage the demands of growing aspirational India and growing demand for credit and varied demands of the economy.”
Sitharaman also highlighted the proposal to set up an asset reconstruction and management company for stressed assets to take over bad loans from banks. It will have government participation, but largely the IBA will be doing it. Banks will also get something from the realised money, she stated.
“There already are some institutions which we would want to use for this purpose, we want them to be professionally run and we will be giving them money but with an expectation that within a few years they would be able to leverage on their own. We will have to make amendments to the existing laws to have the private DFIs (Development Financial Institution) to come in. There is so much development demand I don’t think just one government institution will be able to match up to the demand. I am going to create space through law for private institutions to come do their own,” Sitharaman said.
Commenting on the fiscal deficit target, Sitharaman said it is one thing to be fiscally conservative and prudent at normal times. “I made a conscious statement. If I don’t spend now, I will be postponing the growth and I have to spend,” she observed.
Speaking about the new farm reform laws and the farmers’ protest, she said the country’s minimum support price (MSP) performance is going up. “Our MSP performance is steadily going up from 2014 till today to even doubt the intent of the government,” she noted.
She further added that the agitating farmers must come to the table to share their specific concerns as the government is willing to look at any modifications and concede to the demands.