‘Sept quarter should mark a turnaround in the economy’

Surabhi Washington D.C. | Updated on January 08, 2018

The September quarter should mark a turnaround in the economy and growth will be better than what most analyses are projecting, believes Subhash Chandra Garg, Secretary, Department of Economic Affairs (DEA).

In an interview with BusinessLine, Garg said the government would assess the fiscal deficit target later and also spoke about a possible increase in the target from disinvestment proceeds for 2017-18.

Garg, who was in Washington DC as part of the Indian delegation for the IMF and World Bank meetings, also said that the Iranian authorities were working on the Chabahar port. Edited excerpts:

Six months down the fiscal, how is the economy progressing?

This is when we can take initial stock of the economy after major structural reforms, including demonetisation, the Insolvency Code and the Goods and Services Tax (GST). Some reforms, like demonetisation and GST, were bound to have a short-term disruptive impact. That’s what we saw in the two quarters of January-March and April-June, when GDP growth slowed down. The June quarter reflected the bottoming out of this impact. July onward, the growth path has been resumed. Recent data on automobiles, commercial vehicles, industrial output, Purchasing Mangers’ Index, core sector and exports all point out that even manufacturing, which was the most affected, is back on the rails. The September quarter should mark a turnaround in the process and recovery would be clearly reflected, and will be far better than what most analyses has shown.

US President Donald Trump has announced his intention to decertify the nuclear deal with Iran. How will that impact India? Also Finance Minister Arun Jaitley had a bilateral meeting with the Iranian Minister…

We will have to see the fineprint and how the decertification is handled by the US Congress. The implications will probably travel through the banking sector and whether those transactions can be done or not. But India-Iran bilateral relations remain unchanged. At the meeting between the Ministers, some issues were sorted out, including those on the rupee account. We also discussed to some extent the progress on the Chabahar port. Some more approvals and fast-tracking is required and Iranian authorities promised to do so.

The government recently cut duties on petrol and diesel. Have these increased pressure on the fisc?

It is normal that what happens during the course of a fiscal year is not what was anticipated or planned. There will always be some pressures and changes on revenue and expenditure. The way this year is turning out, there is some uncertainty about revenue, but on the corporate and personal income taxes, the situation seems to be reasonably comfortable. On indirect taxes, the position is not very clear on GST. There will be some impact on revenue, but it is still early to say how much that would be.

Similarly, on non-tax revenue, there are some lesser receipts. Expenditure management has been far more aggressive than usual. In the first six months, more than 50 per cent of the funds have been spent. It is early to say that we will be able to manage within the fiscal deficit. We have said we will take a final call later.

Is the government satisfied with the disinvestment programme?

The disinvestment target of ₹72,500 crore is ambitious, but the government is very sure of meeting it. We are also thinking of the possibility of enhancing it. That would be discussed later, but first we need to assess how much is feasible during the course of the year.

Will any strategic sales, such as of Air India, take place this fiscal?

Air India is on course. A lot of issues have been sorted out. The transaction advisers should also be appointed soon.

Two key reports — the NK Singh Committee report on fiscal consolidation and the other on the change in the financial year — are pending. Any progress on those?

The report on the medium-term fiscal framework is under consideration and will be taken sometime soon. Maybe the more appropriate time would be around the Budget. The report on changing the financial year remains under examination and a decision may take some time.

What is happening on the bilateral investment treaty (BIT)?

Our template on BIT is getting traction, though many have a different view on it. We recently had two Cabinet approvals under the new framework and Brazil is also very keen. So, that will come up soon. For the rest, while we develop and negotiate, the absence of BIT does not amount to any discrimination. No one has told me that they are reconsidering investment if the treaty is not there. There is no adverse impact on India.

( The writer is in Washington D.C. as part of the IMF Journalism Fellowship 2017 to cover the Annual Meetings of the IMF and World Bank.)

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Published on October 15, 2017
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