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India Inc.'s new CFO is making a daunting debut notwithstanding an earlier cameo. Neither does he possess the academic stature of the economist-turned-politician, Manmohan Singh, nor was he Prime Minister Atal Behari Vajpayee's first choice as finance minister. And even as he prepares to take business on the path of swadeshi, he will have to contend with another power-centre in his own ministry: R.K. Kumar, the Union Minister of State For Finance and the proteg of the Bharatiya Janata Party's ally, J. Jayalalitha. Yet, the unassuming Yashwant Sinha is far from overwhelmed. In Interim Budget 98, presented 10 days after he assumed office, the 60-year-old Sinha showed his steely resolve to revive the stagnant economy. After all, his first stint as Union Finance Minister between November, 1990 and June, 1991--when he had to pledge the country's gold to build its foreign exchange reserves--was more challenging. In an interview with Karan Thapar, a confident Sinha elucidates the controversial economic philosophy of swadeshi, demarcates the areas where he would like foreign investment, and underlines his ability to chart his own course as finance minister. Excerpts:
Mr Sinha, different people in the Bharatiya Janata Party (BJP) have come up with different explanations for the concept of swadeshi. As finance minister, (can you) give us the definitive version? Swadeshi is not a government order. It is a state of mind, and it relates not only to economics, but to the entire spectrum of national life. It is an approach and an attitude which could also get reflected in a set of policies. I would define it very broadly by saying that swadeshi is a response to the emerging international situation--what has changed in the last 7-8 years. I remember, in the 1980s, we were discussing the Uruguay Round under GATT (General Agreement on Tariffs & Trade), which led to the formation of the WTO (World Trade Organisation). Many people have felt that India did not get the best possible deal from the treaties signed under GATT and the WTO. Many other developing countries felt the same way. So, swadeshi is a reaction to globalisation and the unfair treatment (meted out) to India. (In fact) it is not a reaction; it is a response. When we found that the government of the day was not measuring up to the expectations of the people in protecting and promoting our national interest, swadeshi acquired even greater importance. It is (trying) to protect and promote national interest. Let's take that as the definition of swadeshi. But, as you know, it is not the definition that causes problems for the people. The devil for them lies in the details. Let's come to those. Your National Agenda for Governance says that the economy should be built on the principle, India Should Be Built By Indians. Over the last 40 years, foreign investment in India has been under 2 per cent of Gross Domestic Product. So, India is, and has been, built by Indians. Are you not being misleading, or redundant, when you make this statement? If we look back at the kind of economic discussions that have taken place in the country in the last seven years--when the process of liberalisation and globalisation was started--the most important concern expressed in these debates was about our attitude to foreign investment. The role of foreign investment in India has been discussed much to the detriment of other important economic issues So, there has been an overemphasis on foreign investment issues... Yes. But don't the facts belie that? Certainly. That is exactly what we are emphasising. Foreign investment is important in some important sectors. But it is not the totality of the economic policy that this government--or any other government in this country--should be following. You say that you want to channel foreign investment into what you call core areas, and away from non-priority areas. What is core, and what is non-priority? We will define that... Why can't you tell me now? I can give you examples. We are looking at foreign investment in a very positive manner. We are saying (that) foreign investment is welcome in areas which are important to us nationally. These include infrastructure, core industries, export-oriented production, and industries where we need foreign technology. Non-priority areas are those in which we are self-sufficient, where we do not need the aid of foreign technology or foreign capital. Is consumer goods a non-priority area? Not all of it. Take, for instance, the food-processing industry. We have a large agricultural base, and should promote food-processing in a big way. It is a consumer goods industry. But if we get high technology, good packaging (know-how) for export-oriented production, foreign investment is welcome--but not for domestic consumption. But we would like to define, very clearly, what is priority, and what is non-priority. In the National Agenda for Governance, we had merely used the word non-priority. It will be the endeavour of the government to define what we mean by that. Already, in the definition, you have moved away from one catchy, but misleading, BJP slogan: Micro-Chips Yes, Potato Chips No. Now, you are saying, the food-processing industry is open to foreign investment with one proviso: that the product (is) for the export market. That is a significant departure... No, it is not a departure. That slogan was a simplistic presentation of `high technology yes, consumer goods no.' But it was a misleading presentation... No, it was not. It was a turn of phrase. It overlooked the fact that Rs 36,000 crore of foodstuffs rotted last year because of the absence of a food-processing industry. That is what you are trying to correct--aren't you? When we say micro-chips, we are talking of high technology. When we talk of potato chips, we are talking of consumer goods, generally. You have defined non-priority as being not necessarily the same as consumer goods. The big concern is, when you say `yes' in core areas and `no' in non-priority areas, foreign investors may say that there are far too many conditions; (so) let's keep away altogether. How do you avoid that problem? That is not our experience. After coming into office, I have met a large number of foreign investors. Let me put all your apprehensions to rest by saying that they are not worried on this score. We might be worried; they are not. An investor who is coming to build roads, airports, power plants, or any other basic infrastructure, is not overconcerned or overworried whether we are promoting investment in potato chips or not. And those who are in the potato chips business are very happy because we are going to keep competition out. You say that consumer goods production for exports will remain open for foreign investment. (Do) you stand by that? I stand by that. But that is not a detailed explanation of the formulation of the policy. It is a response to a question you asked. So, you mean to say that foreign investment can come to India, use Indian resources, use Indian expertise, produce quality goods, but they are only for exports... Largely for exports But Mr Minister, what I am getting at is that foreigners can use our resources, use our expertise, produce quality goods, but we Indians cannot benefit from it. Foreigners can buy the quality products, we cannot... There is a philosophical definition for this. It is a misinterpretation to say that our policies are anti-consumer. At this stage of development, we cannot create islands of prosperity and high consumption when the masses are deprived of (the) basic minimum (needs). People say that Yashwant Sinha is acting, as he claims, to protect and support Indian industry. But, in fact, he is acting to protect some chosen Indian industrialists. That is why you worry about swadeshi... That is absolutely wrong. That is not our intention, and it is farthest from our minds. Let me give you an example. General Electric (GE) comes to India, uses Indian resources, hires a thousand Indian people, produces some of the best bulbs in the market. But in your scheme of things, it will not be permitted to function. You are seeking to protect an Indian industrialist whose bulbs keep fusing and cause problems for the Indian consumer Do you see the unfairness there? There are certain rules of competition that are followed the world over. They have been followed at various stages of development. Those rules prescribe that you should expose your industry, which has functioned in a sheltered market, in the first instance to domestic competition--not necessarily to global competition. But that is at the cost of the domestic consumer. If GE can come and make a better bulb, why shouldn't it? Because, in the past, we have not only prevented GE, but also Indian entrepreneurs from making a better product. Anybody in India should be able to make things he wants to, and if he does not have the technology, he can go to GE, or anybody else, and borrow it. He can start manufacturing bulbs as good as GE bulbs. Your critics say that swadeshi is an attempt to protect products made by Indian entrepreneurs at the cost of swadeshi consumers... It is a complete travesty of truth; it is complete negation of all that we stand for. Swadeshi is very pro-consumer. It is not that we want to foist bad products on the consumer. Swadeshi does not mean defending the inefficiencies of Indian industry, or protecting the high-cost industry. But why can't you let more companies like GE flourish? Why can't we have more Indians flourish? Do you see a trade-off between the two? I see a certain clear policy. Take the case of Indian Airlines. It was notorious for its inefficiency. It is now operating more efficiently because it has been exposed to competition by Indian companies. There are at least half-a-dozen Indian bulb manufacturers, but none of them has started making quality bulbs. GE came and did it, but you are keeping it out of the market... Let us have half-a-dozen more Indian companies Not GE? Not GE, for the moment. I am not referring to any company specifically. In general terms, I can tell you if Indian industry is not able to give us quality products, then promote foreign participation for technology. I am also saying that wherever it is not possible for us to provide competition to Indian industry in the domestic market, we will have an open mind. So, in one instance, you are worried about the social tensions that can be created by too much emphasis on consumer products... Too much consumerism, not consumer products What is the difference? There is a basic difference It is only advertising... No. Consumerism means consuming products which I don't necessarily need. Consumerism actually means people becoming aware of the things that they were not aware of before... Consumerism is the worst sin of capitalism. It forces people to buy things they don't really need, through things like advertising and public relations. The consumer is compelled and conned into buying things. So, you want to stop consumerism, and you want a certain protective threshold for Indian industry. For those two reasons, you will keep foreign investors out of consumer goods, but you will allow them to get into those consumer products which have a secure export market... Competition is the essence. I am not only referring to consumer products; I am referring to all sectors of industry. In areas where Indian entrepreneurs are not in a position to provide competition, to give satisfaction to the consumer we will have to look at the whole spectrum of foreign technology and foreign capital. Suddenly, you are suggesting that there are areas--export-oriented areas and areas where competition is not sufficient--(where) you would allow foreign investment... Our thinking has always been like that. Those who talked in terms of black and white did not understand our policies. Now that we are in government, there is a greater interest in listening to what we have to say. A major concern is the future of the reforms. Your Agenda talks about reappraising the reforms. (BJP's senior leader) Murli Manohar Joshi has talked about reforming the reforms. In you interim budget speech, you have talked about deepening, broadening, and accelerating reforms. What are we to believe? You have to believe what we have said. Reforming the reform process, and deepening, broadening, and accelerating them means the same thing. They don't. When Joshi talked about reforming the reforms, he went on to say that some of the reforms could be reversed. But when you talk about deepening, broadening, and accelerating, it does not mean reversal of reforms... Did Joshi say that we are going to reverse the reforms? In several newspaper interviews that he gave after the Lok Sabha elections, but before the government was formed, he made it clear that reversing some of the reforms was on his agenda... What the BJP has been talking about, and what the Agenda also reflects, is the fact that we are not in agreement with the way the reforms process has been carried out by the previous two governments. We don't agree with the sequencing of the reforms process. If you remember, when Manmohan Singh presented his first budget in 1991, the BJP leadership had welcomed it. But we welcomed internal liberalisation; we have always been in favour of freeing the Indian entrepreneur. But why is the BJP speaking in three voices... No, that is not the case. We have always talked about internal liberalisation preceding external liberalisation. We have always talked about calibrating external liberalisation. Now, it is as clear as daylight that by internal liberalisation, we mean we should do away with all the unnecessary controls that exist for the Indian entrepreneur. That is where we will deepen, broaden, and accelerate What do you reverse? We shall change the sequence. There are areas of the Indian economy where we have to calibrate the process of globalisation more carefully. As finance minister, do you believe that there are any reforms that need to be reversed? All that we are saying is that the sequence has to be altered. When you say alter, does it also include reverse? No. It is only that something will have to come first, and something will have to come later. So, alternations, but no reversals... You are playing around with words But the words are very important... They are not They are not always. Let me reiterate that these are the issues bothering us in India, not foreign investors. Are reforms safe in the BJP's hands? What else did I mean when I said that the reforms will be deepened, broadened, and accelerated? Your message is very different from Joshi's It may be politically difficult for you to accept that you and he speak in different languages. But the mere fact that you use a different language suggests that the reforms are safe in your hands; in his, they are not... That is a media perception. Joshi and I, as is any other BJP leader, stand by our economic philosophy. The reallocation of responsibilities in your ministry has created the impression that you have lost 70 per cent of your powers. You are finance minister only in name... This is the perception of those sick minds who think that transferring an income-tax officer, or an assistant commissioner of income-tax, is the total responsibility and function of a finance minister But by handing over the revenue, banking, and insurance departments, you have given away control over the credit policy and investigative and enforcement agencies. What are you left with? This is not my impression. I don't know where you got the impression that I have handed over all these policy issues. Did you do it out of your own volition, or were you asked to do it? I did it willingly. Other than the budget, what else are you left with? People don't understand the way the finance ministry functions. They don't know, and they need not know. The finance ministry has never functioned in this bifurcated manner before, except during the Emergency... During the Emergency, the distribution of work was clear because the minister of state (for finance) had independent charge. The present minister of state does not have independent charge But the minister has effective functional autonomy... Effective functional autonomy (for R.K. Kumar) is a matter which time will define, and which you and I sitting here cannot tell. Have your powers been diminished? No. Do you remain the finance minister both in power and in name? Yes. You have handed over the revenue department and the supervision over the enforcement agencies to Kumar, who used to be the chartered accounted and financial advisor of (BJP ally) J. Jayalalitha. Now, as minister, he will have some sort of supervisory authority over the cases that she is facing. Is that the right thing to have done? This is an absolutely dumb approach. We know that in today's situation, no agency--whether it is the Enforcement Directorate or the CBI (Central Bureau of Investigation)--is outside the public purview. We have had cases where we know that judicial intervention has made sure that nobody goes out of line. In such a situation, how does it matter who is looking after it? Let me tell you from previous experience that the finance minister or the minister of state for finance has very little role to play as far as the Enforcement Directorate is concerned. It, more or less, functions autonomously. Can you assure that your ministry will continue to prosecute those cases (against Jayalalitha) objectively and effectively? It better remain so because the ministry is not the final word. If we deviate, we are also subject to the discipline of the courts. Justice will be done in all cases. For this very open interview, and for answering those questions so honestly, thank you very much. Thank you. (Extracted with permission from Karan Thapar's In Focus With Karan, produced by Sri Adhikari Brothers Television Network for Home TV.) |
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