Q: I must ask you this question that if the timing a positive surprise, given the fact that our peers Brazil, China, all these peers have been downgraded, and we are the first sovereign to be upgraded ever since the financial crisis. Does this make it even sweeter?
A: Well, I think Prime Minister Shri Narendra Modi and Finance Minister Shri Arun Jaitley have stayed the course consistently. We were sworn-in in 2014 relentlessly they have pursued the agenda of fiscal consolidation. They have ensured that the government focuses both on the macro and in outcomes, delivery to the last man at the bottom of the pyramid. And, end of the day, this consistent fight against black money, against corruption, reform to bring about a dramatic change in the way people behave about paying taxes, the GST, the improvements in income tax collection, a wider tax base. I think consistency has been recognised by the rating agencies.
One after the other you had the PEW report come in just day before yesterday, before that you had the ease of doing business report. Consistently, you are seeing the world recognise what the people of India recognised first that this is the government that is performing, here is a leadership led by Prime Minister Modi which means business when it comes to serving the people of India.
Q: While Mr Goyal the reports sort of points out a slew of reforms undertaken by the government from GST, demonetization, the monetary policy framework, etc. etc. But one would argue that probably the immediate trigger was the move to recapitalize banks, the massive thrust on recapitalizing bonds via recap bonds as well. Would you agree that that’s the immediate trigger because it shows the government’s intent to fix the NPA crisis?
A: Well, our intent to fix the NPA crisis was recognised almost 2 years ago, the fact that this has been consistent in our approach, fiscal responsibility has been consistently maintained by this government, banking and insolvency code coupled with bank recapitalization, it’s I think both put together that demonstrate this government is very keen to clean up the banking system. The direct benefit transfer linked with Aadhar, the Jan Dhan account, Aadhar Mobile, the JAM trinity, coupled with direct benefit transfer finally showing a ray of hope that leakages and subsidies will be over in this country. Improvements in tax collection, a wider tax base, lowering of rates both on the direct and the indirect tax side.
GST – something which governments for years could not do, in fact, I think there is no parallel in the world of a country of the size of India implementing GST. And consistently doing all this in the midst of elections, so without fear that this move will cause this election, this move will have an impact on this election. I think the people of India first gave us the thumbs up on that and now the world is also recognizing that this kind of focus on a strong, structural framework for the future, this kind of focus in an honest and clean administration probably has never been seen in the country before.
It was the last time Moody’s upgraded India was when Mr Vajpayee was Prime Minister again leading a BJP-led NDA government. It clearly demonstrates to the people of India that it is only the Bhartiya Janta Party and its leadership, led now by Prime Minister Shri Narendra Modi, Finance Minister Shri Jaitley, which is truly focused in making India once again that great country that we always were.
Q: Alright, you made your political pitch now, you will have to answer the question about the economy back once again. A lot of people believe, and laud the fact that yes, we have got a ratings upgrade up to 14 years, it’s momentous. But a lot of people believe this will obviously lower our cost of debt, this is going to help us raise cheaper capital. What will all of that mean for the capital expenditure cycle? What will all of that mean for investments because the cost of capital is going to be a lot lower now?
A: Well, of course, it will not only be the cost of debt, but it will also be the equity return expectation of investors, both domestically and internationally which hopefully will right size now, something which we all believe should have happened given the reforms that we had been doing, given the performance of this government much earlier. Hopefully, now the monetary policy authorities will also recognise that consistently low inflation that the Modi government has been associated with will now be recognized by the regulators also. The last figure also is much below the estimates of the regulator, all of this will mean that we will have ability to raise more funds and more capital to reinvigorate the economy, give a spur to growth, to help capex both on the public side and on the private side. It will help us take our welfare programmes for the people on a much fast track basis.
Take the affordable housing programme, only yesterday in the cabinet, we allowed even larger houses which the middle class aspires to have to be benefited by the Pradhan Mantri Awas Yojana. Now all of those people will see lowering of interest rates, better affordability and we can hopefully look at further accelerating the pace towards that New India – 2022, where everybody owns their own house. Already on electricity, you are seeing significant upswing in the demand for electricity, more and more homes are getting connected. In the next 12 to 15 months, you will probably see every home in this country, every willing consumer being connected with electricity. Our Ujjwala Yojana where we are giving LPG to all our poor families who could not afford LPG connections, by the end of next year I think most of those families will be covered.
Look at the dramatic change that is happening in the thinking in the country. I had the Chief Minister of Rajasthan with me few minutes back, and we had brought in UDAY, the Ujjwal DISCOM Assurance Yojana, the power sector reform. Rajasthan has been able to bring down their losses in the DISCOMs to one-third of what there were – from 15,000 crores to 4,800 crores last year, in the current year they expect to halve that to approximately 2,500 crores and turn a profit next year, 2 years ahead of schedule.
That is the dramatic turnaround that we are seeing in this country. To my mind, it’s only a positive going forward. Even Moody’s has estimated that given that this transient impact of GST and all the other improvements that we have done is now behind us. They expect the economy to be growing 7.5%.
November 17, 2017 Speaking with ANI