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Budget cleared doubt on fiscal consolidation roadmap: Sinha

The RBI and the government are on the same page as far as fiscal deficit targets and rate cuts are concerned. That’s the word from Jayant Sinha, the minister of state for finance. Speaking exclusively to CNBC-TV18’s Shereen Bhan, as a part of the economic forum for india at L-S-E conference which will take place on the 14th of March. .Sinha defended the fiscal consolidation roadmap drawn up by the finance minister.

Below is the transcript of Jayant Sinha’s interview with CNBC-TV18’s Shereen Bhan.

Q: On fiscal consolidation map…

Sinha: As far as the domestic data is concerned, the big event has been obviously the Budget and really clarification on what the fiscal consolidation roadmap is and we had obviously said 4.1 percent, 3.6 percent and then 3 percent. There was concern if can you achieve 4.1 percent and what is the quality of achieving that target, and then thereafter what are you going to do with the 3.6 percent and the 3 percent.

So now that all of that has been clarified some of that uncertainty on the fiscal side has now been removed. That has created the space for RBI to continue to bring rates down to a level that they think balances the monetary stability side of the equation.

Q: There is also speculation that perhaps this out of turn rate cut by the Reserve Bank has to do with the fact that there is a little bit of understanding and a little bit of give and take between the Reserve Bank and the finance ministry as far as the monetary policy agreement is concerned which is a pretty historic landmark agreement and the finance ministry seems to have accepted most of the recommendations of the Urjit Patel Committee report. How much of this has to do with the fact that you seem to have taken that on board?

A: We have discussed many times before. The Reserve Bank of India (RBI) is a very professional data driven organisation and I am not sure that is the data that they use when they think about where rates are going.

Q: One of the other things to focus on as far as execution and infrastructure is concerned is to be able to revamp public private partnership (PPP). The Finance Minister spoke about that. So the Cabinet for now has decided to defer the decision to operationalise 3P India which was the promise made in the previous Budget. Can you explain to us why is that and what kind of revamping of the public private agreement are we really looking to add? If I were to take into consideration what the road minister for instance is doing as far as road agreements and road public private partnership projects are concerned where he has said that you need to delist these projects and hence the government will have to provide almost up to 40 percent equity. Is that the model that we are going to be following as far as other infrastructure projects are concerned?

A: The fact of the matter is that when it comes to PPP projects we have inherited a whole host of projects that are right now stalled and in trouble etc . As we work through them we begin to have a better understanding of what it will take first of all for these stalled projects moving and secondly if in fact we have to start new projects how those should be put together. So really what we are learning now which is reflected in the Budget language as well is that there is a need both to have new and fresh capital coming in which is a national investment trust and so on. And also a new approach towards these PPP projects where perhaps the sovereign takes on more of the risk.

So because we are working through all of these right now we are getting our hands very dirty in dealing with all of these. It makes sense to take a step back and really think through what is the right way to move these projects.

 Q: So when will we have clarity on what the reworked PPP model is likely to be?

A: Wait and watch. Again as I said it is very important to get the investment cycle moving. This is something that is a very high priority.

Q: But is it going to be specific for specific sectors or do you believe that there will be a model framework which will be sector agnostic so to speak?

A: Part of what we have learned is that the sectors have to be different because the issues in each sector has to be different because the issues in each sector are actually quite different and in some cases we have fuel supply problems. In other cases we have land acquisition problems, in other cases we have financing issues. So, in each sector because of the nature of the sector, so roads there is almost always a land acquisition issue of some sort and obviously in power we have had the fuel supply challenges and then the rate agreements etc that have been quite challenging.
So in each sector we find that it is a little bit different and therefore the one size fits all type template is probably not going to be as effective as taking a more customised approach to it.

Q: Let’s talk about roads in specific because you have set out a very ambitious target in the Budget as far as roads are concerned. The Prime Minister in Parliament said that you have gone up about 5 km a day top about 10 km a day. The Roads Minister set a target of 25 km a day; it is an ambitious task but do you believe that without the requisite clearances as far as issues like land for instance concern or being able to get the private sector on board this kind of targets are going to be realised?

A: Obviously the Land acquisition Bill is very important in that regard but the honourable Transport Minister has been very clear about his determination and he is working very hard to ensure that many of these stalled projects are executed and get the attention that they deserve. I have a lot of confidence in fact and everything that we are hearing here in the Finance Ministry is that these projects in fact are moving forward and that is exactly why in the Budget we have significantly increased the allocation as far as roads are concerned.

Q: You have also significantly increased the allocation towards the Railways. How soon are we likely to see things move as far as Railways are concerned? Several promises that the Railway Minister has made; bringing private players on board as far as station redevelopment is concerned, of course FDI has not been talked about in the Budget, they have talked about multilateral agencies funding, they have talked a lot about partnering with governments and so on and so forth. Is FDI a bad word in that sense even though 100 percent is being allowed as far as Railways are concerned but are we shying away from private FDI?

A: The honourable Railway Minister has been very clear about his priorities. The Railways have been chronically starved of investments for quite a long period of time and as a result of that there is in fact a whole list of very high return projects that are available there in terms of getting going and being shovel ready and really moving forwards very quickly and so the one lakh crore investment plan this year of which hopefully Rs 40,000 crore or so is coming from us is something that will move forward very quickly and there are different nuances there, they are different types of projects, some of course are pro Railways; as the honourable Railway Minister has said when it comes to stations that I obviously an area where there can be terrific public–private partnership and he wants to do it in a very transparent and clear manner so, as far as Railways are concerned, we should be quite confident that in fact that will move forward very quickly because they have been so starved of investment and the good news for all of us who are using the Railways and all of us as citizens of this country is that a)it is really going to make the Railway experience much nicer and b) that the economic and social returns from those projects are going to be very high with strong multiplier effects.


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