Nirmala Sitharaman To India Inc.: ‘Pray, Please Wake Up The Animal Instinct’

The Budget 2019 has shown that there is no inaction on the government’s part, says Finance Minister Nirmala Sitharaman.

Finance Minister Nirmala Sitharaman. (Photographer: T. Narayan/Bloomberg)
Finance Minister Nirmala Sitharaman. (Photographer: T. Narayan/Bloomberg)

Finance Minister Niramala Sitharaman on Monday called upon Corporate India to awaken India’s “animal instinct”, saying the Union Budget 2019-20 and the central government is giving enough incentives to boost the Indian economy.

The government recognises the role India Inc. has to play and is taking action—both on the liquidity and insolvency front—in consultation with the Reserve Bank of India, and in efforts to drive consumption, she said in a budget round table with India Today TV.

“A situation for which the government is not responsible—governance issues, liquidity issues or solvency issues—brought a little crisis before us,” Sitharaman said. “Even for that I have offered a solution, working together with the Reserve Bank of India.”

The Finance Ministry on Friday announced a partial loan guarantee scheme for non-bank lenders to ensure more liquidity for the crisis-hit NBFC sector.

Not just liquidity, the Indian economy itself showed signs of fragility in the first quarter of 2019 with growth in the country’s gross domestic product slowing to a five-year low of 5.8 percent. Sale of passengers vehicles fell for the seventh straight month in May, highlighting the sluggish consumer spending while tractor sales also reflected a similar picture. The Nikkei Services PMI Index fell to its weakest level in 12 months in May. That was however, offset by a faster pace of expansion in manufacturing activity.

“Once the credit flow goes through the NBFCs again, your buying of cars, homes, agricultural equipment, all will be hopefully restored. From our side, no inaction.”

While the government has chosen to stick to fiscal prudence, it is not going to water down on its infrastructure commitments, Sitharaman said, adding that the intention of driving consumption is also implicit in the budget. “Pray, please wake up the animal instinct.”

The government has allotted Rs 100 lakh crore over the next five years to build roads, highways, Bharatmala, Sagarmala and other infrastructure projects.

India is using the same golden path it has followed earlier—using infrastructure spending, rural schemes, adopting technology—to put money in the hands of the people, she said. “Consumption from the point of view of investment in infrastructure, consumption from the other end of putting money into the people’s hands, consumption also to make sure the institutions which are the ones which are facilitating credit are all doing it.”

On Taxing The ‘Super Rich’

The union budget introduced a higher tax on those earning more than Rs 2 crore, urging India’s wealthy to make a larger contribution to the nation’s growth.

Sitharaman urged the “super-rich” to keep their business in India and restart a conversation with the ministry at a later time when income is more equitable.

“Ultimately this country needs a little bit more contributions from all of us. I am certainly not in agreement with people who tell me this is 'robbing Peter to pay Paul'. No, sorry. You are a part of this country and you might have to for some more time bear with a not-so-equitable tax structure,” said Sitharaman.

Other Highlights

  • Government will work on separating the politics from the economics for power tariffs.
  • Look forward to “positive engagement” with the RBI.
  • Government and RBI has had many discussions on development financing and will work on solutions to bring it back.
  • Government will work on reducing corporate tax at the earliest.
  • Institutions like the Confederation of Indian Industry, and others, need to focus on working with the states.
  • Dealing with the armed forces was simpler than dealing with corporate India, with due respect to the challenges presented by both portfolios.
  • Revenue and divestment target is not unrealistic.
  • No other government has been imaginative enough to use various methods to put a stop on wastage of tax money.