I consider Mr. Manmohan Singh as my idol. Not because he is present Prime Minister or former Finance Minister or former RBI governor. But because of his economist stature over PM (or FM), handling the worst situation of 1991 & 92 & so on. I always read any news regarding him or his speeches or his interviews. Even I posted his speech what he gave after the vote of confidence in the parliament. So here is another interview with press in his special plane while coming back from G20 summit, have a look at it.
You had predicted that growth rate would be impacted...
Well, I don't take credit, but Finance Minister, Mr (P) Chidambaram, and I had anticipated that there is likely to be a global slowdown this year. Therefore, in preparing for the Budget for the current year, we budgeted for a very substantial amount of deficit, precisely to take care of the slack that may emerge.
So as far as our economy is concerned, I think, our fiscal stimulus is already on. The fact that we have given record prices to the producers of wheat and rice; that Rs 71,000 crores (Rs 710 billion) of loans have been written off, we have set in motion a very extensive programme for social service and infrastructure expansion.
So as far as India is concerned, fiscal stimulus is by and large already in place. We have already taken steps to provide more liquidity, and ready to provide even more, if required.
Is there anything else which is being given apart from what is already provided for? What is the next fiscal stimulus package that can be expected?
Well, I think this is not a once and for all process. We are keeping the situation under review on a day-to-day basis. The Reserve Bank of India [Get Quote] is at it, the finance ministry is at it... I'm heading a committee with the finance minister and Commerce Minister (Kamal Nath). So whatever is needed to keep the economy on an even keel will be done.
Fortunately inflation is now becoming less of a problem and if you look at the inflation from a different angle, it is de-seasonlized data.
The situation is turning out to be much better on the inflation front than is evident from this year-on-year figures. That will give us greater maneuverability to deal with the economic situation.
Should we be more proactive in cutting interest rates?
I think as far as interest rates are concerned, that is the preserve of the Reserve Bank of India. It would not be proper for me to comment on this but as I said this is an evolving situation, if inflation rate comes down, if we feel confident that inflation will not be a problem, there is scope for maneuverability, both in more aggressive use of monetary policy and more aggressive use of fiscal policy.
Is the global crisis a failure of capitalism as an ideology or a mistake
Well, financial capital certainly has shown weaknesses. There has been lack of supervision, there has been too much faith that self-interest will make people behave in an enlightened manner. So these are weaknesses of the system, the financial system regulation has been ineffective. But I don't believe that these are inherent in the system.
The Left is saying that they have saved the nation by not allowing the pension bill. Your comment please.
But what has that got to do with this. Even if the pension bill was not there, I don't see the world situation would have been different. We are a small player. Global meltdown is not a crisis which is the result of wrong policies of the Government of India. It is a crisis made outside India. We are the victims of it, not the cause.
Oil prices have come down. Do you intend to respond?
Well we will look at all the options. We have still a considerable deficit on the oil account. This is as I said an evolving situation.
Was there consensus on your point on protectionism?
Yes there is a general agreement that protectionism would be a wrong response to the present situation. It would only accentuate the crisis. Such 'beggar thy neighbor policies' have never worked in the past. They only slowdown and lead to decline of economic activity all around. There is in the communique, I think, a reaffirmation that all countries will resist a recourse to protectionist tendencies.
Would there be an impact on the Doha round of WTO talks?
Yes. A part of the same communique states that this gives urgency to the task of completing the Doha round as early as possible.
Your comments on the capital account convertibility and banking review as stated in your speech at RBI in 2006
When I went to the Reserve Bank some two years ago, I had said that the whole issue of capital account convertibility needs to be relooked at. There was a Tarapore Committee Report, so I suggested that maybe Tarapore should be asked to relook and revisit it. I did not pronounce anything about if we were going to have capital account convertibility or when. It was a suggestion and Reserve Bank followed it up. And that report is a public document.
What about banking sector review?
This is a question about FDI (foreign direct investment) in banking- (indicates to FM)...
Finance minister: The notification was made towards the end of the NDA Government in January-February 2004. All that we said was that since the notification has been made, we will allow foreign capital in private-sector banks. If any Indian investor wants to buy shares in a private-sector bank, he is subject to a voting cap. As long as there is a voting cap new capital will not come into a private-sector bank. We plan to remove the voting cap.
That amendment (reviewing the voting cap) had been introduced in the parliament. Whether it is foreign capital or Indian capital into a private-sector bank, as long as this cap is there no capital is going to come.
Is the government satisfied with the way it has handled the situation (financial crisis)? Will the people of this country vote the government back?
Well, I think we have done reasonably well and I sincerely hope that the people of India would repose their confidence in us.
When would this crisis get over?
I am not an astrologer. I think there are apprehensions that we haven't seen the worst of the crisis. There are conflicting viewpoints. Our efforts must be to contain and rollback the crisis. But how long will it take, I am afraid, I cannot pronounce with any sense of authority.
Are there any apprehensions in India about Obama regime?
No, no. From whatever feedback I have, I think we have no reason to be apprehensive about the change of regime in the United States. There is general recognition in the US regarding the role that India can play, ...India should play. There is considerable appreiciation of the way Indian economy is managed. And more recently, also Obama did send Madeleine Albright and former Congressman Leach to interact with us. They have given us all the positive indication, so there is no reason to have any doubts about the intentions of the Obama administration towards India.
Your response to the approaching elections and the crisis...
Well, as I said the crisis is not our making. What I would like is for the people of India to judge us by the response of our government to this crisis. We acted in time, and while the rest of the world is in doom and gloom, we will still maintain a growth rate of 7.5 per cent. Growth with stability, more socially inclusive growth is a reality and will remain a reality despite the onslaught of the adverse turn in our external environment.
Will the crisis postpone or hasten elections?
It has no bearing on the elections. Elections will be held on schedule.
What has been to IMF's role, as far as the crisis is concerned?
It has been endorsed that more resources should be provided to the International Monetary Fund and the World Bank. At the meeting itself, the Japanese government announced a loan of hundred billion dollars to the IMF. So on the whole I think, the climate in the developed world is to recognise that international institutions need extra resources if they are to come to the rescue of the emerging countries and other developing countries.
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