Interview: Yashwant Sinha: "Chidambaram misled the nation"

Interview

India Today
Nov 30, 1998

Interview of the Week: Yashwant Sinha
"Chidambaram misled the nation"

If the pre-poll surveys of the elections to four state assemblies are any indication, the BJP's fortunes are headed for a downswing. Eight months after the party took charge, the economy continues to be in a slump. The Government claims to have taken several measures to reverse the trend but the results are not in evidence, not as yet at least. And if there is one thing that has the people questioning the BJP's credentials to govern, it is the Government's inability to contain prices. Since it took over in March this year, prices of essential items have gone through the roof. But the man at the centre of it all, Finance Minister Yashwant Sinha, who is also the chairman of the Cabinet Committee on Prices, believes he's done his bit and says he is being unfairly judged. During an hour-long interview with Editor Prabhu Chawla and Special Correspondent Shefali Rekhi, he was mostly on the defensive, choosing to be combative only when accusing his predecessors of being responsible for the current economic mess. Excerpts:

Q. How would you like to judge yourself after holding office for more than eight months? Haven't you failed miserably?

A. I did say judge me by my performance, but judge me at the end of the year. I should not be judged on a quarterly or fortnightly basis.

Q. Prices have gone through the roof. Do you have any plans to contain them?

A. The Government is doing everything in its power to improve supplies. We have already resorted to imports. We have put everything on OGL, people are free to import. If the prices of onions are going up, then imports are also happening now. Inflation will not touch 10 per cent. In future also if we have to import to contain prices, we will not hesitate to do so.

Q. But even as far as the budget is concerned, everything seems to be going off track ?

A. I would have been happier if the revenue was 20 per cent above target and expenditure 20 per cent below target. That is clearly not the case. But that is a dream situation which no finance minister has had.

Q. The increasing fiscal deficit is worrying.

A. I would like to remind all those who are screaming from the rooftops about the fiscal situation of what happened in their times. Fiscal deficit was allowed to go up by a whopping Rs 20,000 crore last year to touch 6.1 per cent of the GDP. Even in the halcyon days of the Congress in 1993-94, fiscal deficit was 7.4 per cent of the GDP. People seem to forget these things.

Q. What then are your achievements? The Congress at least revived the markets. What have you done?

A. If you recall, the markets collapsed during the Congress regime. And the reason is not far to seek. The prime minister's directive to us to go after all those companies which cheated small investors in 1993-94 and 1994-95 is the clearest indication of what happened in the capital markets then. The Congress created a situation where the law of the jungle prevailed. There was absolutely no surveillance. The party was selectively favouring foreign investors. Foreign companies were allowed to pick up shares in their Indian subsidiaries at throwaway prices. They created an artificial boom which had to end. The events in the stock markets between 1991 and 1996 is the biggest proof of the kind of crony capitalism they tried to introduce in the country.

Q. Your government has already taken several measures. Why isn't confidence looking up?

A. If the markets are a reflection of the fundamentals of the economy, then they should be better than they are today. But we seem to be reacting to the essentially negative news in both the international and local markets. As far as the consumer is concerned, it is a fact that the confidence is missing. Both industry and the Government have to examine this. And as far as industry is concerned, the reduction of duties beyond the bound rates for WTO is responsible for causing an uncalled for damage to a large number of sectors of the Indian economy.

Q. What is responsible for the current slide ?

A. The slowdown began in the middle of 1996. And it had to do with the last two years of the P.V. Narasimha Rao government when reforms slowed down. The result is not felt a day later, it happens over time and was obvious by the middle of 1996. Thereafter there was the United Front (UF) government but it clearly did not take the nation into confidence and tell the truth about the state of the economy.

Q. Do you mean to say that Chidambaram misled the country?

A. Yes, he misled the nation.

Q. But he did present a dream budget?

A. It was a dream budget only as far as the reduction in income tax was concerned. It was a bribe to the middle class. The dream turned sour within a few months. Ironically, Yashwant Sinha's budget became a dirty budget because I imposed a 4 per cent duty on imports.

Q. People say you don't have any vision, you lack ideas and that's why you are unable to revive the economy?

A. Could Chidambaram revive the economy with his dream budget? There wasn't the slightest sign of life right till the end. When we took over in March, fiscal deficit was at an all-time high.

Q. But you don't seem to have any innovative ideas to reverse this trend.

A. Please remember two things. Immediately after taking charge we went for the nuclear tests which were followed by sanctions. This had an impact on sentiments. There was also a further worsening of the East Asian situation. Any one of this was bad enough. But we managed to face both and as a result, the external view of India has improved dramatically. When I go abroad people compliment me. But within the country, there is a feeling of gloom.

Q. Why this contradiction?

A. Certain industries are not yet out of the woods. Steel and cement, for example. We have been taking a series of measures. Bank credit has gone up considerably. In terms of real reforms, I would say that this Government has in the past six-seven months brought about more real reforms than both the Congress and the UF governments did in seven years. They avoided taking unpopular decisions on disinvestment and reduction of subsidies.

Q. But you haven't done that either.

A. The delay is because these require legislative action. We have decided to close down the PSUs that can't be revived. The insurance sector is being opened for private sector. We are carrying forward reforms in a much more substantive and meaningful way that in the past.

Q. But people don't seem to believe all this. They think you are on an announcement spree. The Government's credibility seems to be low.

A. I think the BJP-led Government is being unfairly judged on the economic front. It is not being given the credit for the positive things that are happening in the economy.

Q. Isn't the shortfall in excise and customs receipts worrying?

A. I am reviewing both expenditure and revenue on a weekly basis. Wait till March. I don't know why people want to jump to conclusions in the middle of the year. On a personal note, I must tell you, people are saying Yashwant Sinha doesn't have a clue. I have spent 40 years in government and I don't have a clue? If I don't have a clue, then nobody has a clue.

Q. Are there any plans to cut expenditure?

A. Reduction in expenditure cannot be the will of the finance minister alone. It is an issue where you need not only the support of the entire government but also the entire political spectrum.

Q. Even within the Finance Ministry, there are hardly any reforms, no plans to prune the bureaucracy.

A. There's a general feeling that we are overstaffed. Even with the current staff in departments such as income tax, we cannot cope with the workload.

Q. In the assembly elections, the Congress is making you out to be the villain on the economic front.

A. This is pure politics and nothing else. The Congress party ought to be aware more than anyone else about the state of the economy because by and large it is the party's creation.

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