The Hindu Business Line : I believe 10 pc growth is sustainable: Jaswant

When I and the Prime Minister had talked about 8 per cent growth, we were scoffed at. Now we have reached 10.4 and we are asked if it is sustainable. I do believe that it is. We will attain an 8-plus percentage growth this year (2003-04), and we will continue on this path in the coming year.

The Finance Minister, Mr Jaswant Singh, at North Block in the Capital on Friday. — Kamal Narang

New Delhi , April 2

AMID hectic electioneering, the Finance Minister, Mr Jaswant Singh, took time off for a chat to project the health of the economy. And why not, a 10.4 per cent quarterly GDP growth is no mean achievement and does not happen often.

In an exclusive interview with Business Line on Friday, Mr Singh insists that such a growth level is sustainable, and an 8 per cent-plus growth for the year just gone by is no longer a dream. It will be achieved. The following are excerpts from the interview:

What is the secret behind the 10.4 per cent GDP growth?

No, I don't think there is any secret in it. It is without doubt gratifying, because a 10.4 per cent quarterly growth is perhaps the highest ever. And it's certainly the highest in the world today. It is also much higher than our Eastern neighbour's.

Where do we go from here?

Well, there's only one direction in which to go, and that is, continue to move forward and further up the path of health.

Is it sustainable?

Of course, it is. When I and the Prime Minister had talked about 8 per cent growth, we were scoffed at. Now we have reached 10.4 and we are asked if it is sustainable. I do believe that it is. We will attain an 8-plus percentage growth this year (2003-04), and we will continue on this path in the coming year.

What are the policies and reforms that need to be put in place to sustain this rate of growth?

I think we need to make continuous efforts on all elements of national growth: service, manufacturing, industry plus agriculture. We will have to continue with the various policies and programmes, including the second `Green Revolution' measures that have been adopted, and certain sectoral measures. Some very strong measures for some of our strong traditional industries such as steel and textiles have been also taken, and they will have to continue. The service sector has demonstrated that it is a tremendous growth area. But India simply cannot be a service sector economy. And, therefore, there has to be stress on manufacturing, there has to be evacuation of the relevance of agriculture and hence, the second Green Revolution.

Over the last few months, the rupee has been appreciating and exporters are taking a hit. What steps does the Government plan to take in this regard?

Firstly, the management of the currency and exchange rate is a function that is really the preserve of the Reserve Bank of India, and it does so, of course, in consultation with the Finance Ministry. I, for one, would be extremely careful in assessing the rupee movement only against the dollar, because of the basket of currencies. The rupee has not seen much appreciation against the euro or the yen or the Gulf currencies through which so much of remittances come in, or even the pound sterling. The dollar is easing on account of various factors. So to suggest that the export sector is suffering because of the appreciation of the rupee against the dollar is overstating the case because all export figures belie this apprehension. Exports are still growing. Besides, the inter-relationship between the exchange rates and exports is complex. If you say that exports are negatively influenced because of exchange rates, then imports are influenced in the reverse direction. So we should not take a hasty step and it will be attended to.

The Disinvestment Minister, Mr Arun Shourie, has said that the Government can mop up as much as Rs 1,00,000 crore annually through the disinvestment route. Do you agree with the figure? And if so, would that not crowd out public issues by private companies?

I do think that the Indian market has the ability to absorb it (Rs 1,00,000 crore of public sector offering). It is, therefore, possible.

Is it desirable?

Yes, we should reduce some of our over-weighted presence (in public sector) because this money goes into various other requirements of the nation, and it will help in ultimately reducing the fiscal deficit and revenue deficit and improve the overall health of the economy. On the third aspect of crowding out when these issues (disinvestment in six PSUs in the last round) were offered in the market this time, then, too, there were observations made by several learned people that it is all bunching and that the market will not be able to absorb it. The strength that the market demonstrated has belied all such apprehensions. Now we have at least — I don't know the exact figure — but at least a million new entrants at the level of individual retail investors. This is a very good thing.

There is a feeling that after the elections there is bound to be higher inflation figures with the rise in petro-prices getting reflected?

I am not an economist. My job is to manage the country's economy. Secondly, I am certainly not an astrologer. So, when you say after the election this is what will happen, I would much rather wait for after the elections. Though it's right that crores of rupees would come into circulation during elections because the candidates bring a lot of money. That money will have an impact on demand and supply. Why don't we wait and watch this space?

There was recently a major controversy over IDFC and its possible merger with SBI. The issue seems to have been sorted out. But do you feel this could have an impact on the future restructuring of institutions, such as the pending merger of IFCI with PNB.

Not at all. This is a completely misplaced controversy, and it is on incorrect assessment. The IDFC was established as a development finance institution some seven years back. It received about Rs 1,650 crore of Government money and the Government has through various financial institutions 49 per cent of the shares. It was announced in Parliament that we need an infrastructure and development institution. The IDBI is suffering from a burden of roughly Rs 17,000 crore of non-performing assets. We do need a concerted effort for development finance. So a Rs 50,000-crore fund has been established.

Who will manage this?

A consortium comprising SBI, IDFC and IDBI will manage it. Each of them has a certain attribute. Nobody is merging with anybody. It is one of the anomalies of IDFC that 15 per cent of its shareholding is held by the RBI. When I came in, I found it truly unacceptable. The central bank of India, the Reserve Bank, must not be a shareholder in any corporate body. So all that will happen is that 15 per cent of the share the Government will buy from the RBI. For infrastructure development, we need a healthy and a strong balance sheet, SBI provides that balance sheet, IDFC provides project assessment capability, IDBI provides managerial and support staff. It was a completely unnecessary controversy.

The restructuring of IDBI is also pending. Do you see a possible merger between institutions such as IDBI, IDFC, IIBI and IFCI?

At the present moment there is no question of merger of IDFC with either IDBI or SBI.