Yashwant Sinha: time for bold reforms

Former Finance and External Affairs Minister Yashwant Sinha on Saturday hoped the 2015 Union Budget would be “transformational” and set off a series of second-generation reforms to lift the country’s GDP growth rate on to a higher trajectory.

In a conversation with a select gathering of Chennai’s business elite at a ‘Breakfast with BusinessLine ’ event at the Park Sheraton Hotel & Towers, Sinha said the Narendra Modi government has already taken small steps to improve investor sentiment.

Now, it is time for bold reforms, he added, noting that expectations were high and “if there was any delay, people would get disappointed”.

Sinha drew parallels to the current situation with his stint as the Finance Minister in 1998, “when the situation was similar and everyone was asking how to kick-start the economy”. He shared his recipe for a revival of the economy: bring down inflation, give space for the RBI to cut rates, and take up large infrastructure projects to attract investment.

The veteran BJP leader said: “Now, we are caught up in the trap of sub-5 per cent GDP growth. My advice to the government is to unlock held-up infrastructure and core sector projects.”

But Sinha, under whose stewardship the Finance Ministry had unleashed reforms in the insurance, telecom and housing sectors, cautioned that “the government should act, and should be seen as acting, on livelihood issues and quality of life issues. Hopefully the next year’s Union Budget will cater to this area also,” he said.

He acknowledged that the corporate world was “frustrated” with the delay in bringing out new policies. At the same time, he added: “Reforms in India have always been very difficult and elude consensus among political parties.”

A thinking think-tank Sinha addressed the gathering after a sumptuous breakfast. As the invited audience settled down, he gave them some food for thought.

Responding to a question from former Tamil Nadu Health Minister HV Hande on what could replace the Planning Commission, Sinha said: “I think we need a body to think for the government. The Planning Commission had stopped thinking because it was caught up in routing/allocation (of funds) to States.”

“I think there should be a small wing in the new commission that will follow up on behalf of the Prime Minister some nationally important schemes, such as rural infrastructure, education and health, and employment,” said Sinha.

Defending his step as Finance Minister to lift restrictions on imports in April 2001 under the agreement with the WTO, Sinha said that this “single step has helped Indian industry to become competitive. If they (companies in China) are manufacturing (idols of) Indian gods and making Diwali Chinese, then we have to face that competition. That is the way forward and we shouldn’t look for protection.”

An idea whose time has come Sinha asked the gathering, which included some of the leading businessmen from Chennai, to be patient with the implementation of GST (Goods and Services Tax). “It is a fundamental change from the Constitution of India, which had given States the right to impose taxes. Now, that power is being taken away… it is a difficult exercise and we have come so close that it doesn’t matter if it is passed in the Winter Session or in the session after that. GST is coming because the time of the idea has come,” said Sinha.

Reiterating the importance of small and medium enterprises (SMEs), Sinha said that the Prime Minister, too, agrees that there should be reforms to incentivise SMEs. “India won’t prosper until the small-scale sector prospers. You can’t have 50 per cent of the population depending on agriculture, which is 15 per cent of the economy,” said the veteran leader.

Modi wave Shifting gears to politics, Sinha said that the ‘Modi wave’ has become stronger since the Lok Sabha elections, and that the BJP would win by a comfortable margin in the ongoing assembly elections in Jharkhand. He brushed away a few of the opinion polls that predicted the party would fall short of a majority. “My reading of the ground situation in Jharkhand is that the BJP will get a comfortable majority on its own, without its allies,” said the former Member of Parliament from Hazaribagh, Jharkhand.