Have a 'Good Case' Against Mallya, Now up to British Courts: Arun Jaitley
India has a "good case" for the extradition of absconding business tycoon Vijay Mallya and it is now left to British courts to take the "relevant decisions", Finance Minister Arun Jaitley has said.
India has a "good case" for the extradition of absconding business tycoon Vijay Mallya and it is now left to British courts to take the "relevant decisions", Finance Minister Arun Jaitley has said.
"The UK is known for its fairness and its civility in its administration of laws, etc. and I do not think they can even countenance a situation where anybody who has duped the banks or who has broken the law then finds London to be a new haven," Jaitley told CNBC-TV18's Malvika Jain in an exclusive interview.
The Finance Minister spoke on a host of issues, including India's concerns about rising global protectionism. Jaitley said India has conveyed its concerns to the US over issues such as the ongoing visa row.
Jaitley is in Washington to attend the Spring Meeting of the IMF - World Bank Group. Here is a transcript of the interview.
Q: You are here to attend the International Monetary Fund's (IMF)-World Bank Spring meetings. The Chiefs of the IMF as well as the World Bank have both, raised caution against the growing protectionism. This is something that is not really in the interest of countries like India. How concerned are you about protectionism and the situation across the world?
A: We are certainly concerned and I am sure many people in the world are concerned for the reason that the protectionist policies which have been attempted by economies have not paid dividend.
Let us take the Indian example. There was a time we were highly protectionist and both, within domestic liberalisation and otherwise, our growth rates were entirely different than compared to what they are today. The eventual impact of a protectionist policy could be that your companies will have to buy products compared to global products which are costlier, your companies will have to hire services which are costlier.
Q: But what about issues on job creation?
A: Inefficiency in the long run may not help job creation. Higher costs and costlier products and costlier services may not end up helping job creation. So, you have to then tailor your own domestic economy in a manner where you can increase manufacturing by producing products, which are competitive.
Q: But you did meet with the Commerce Secretary of the United States of America, yesterday and we understand that there were certain deliberations over the issue of H1-B visa regime or at least you mentioned this to him. Are there any specific assurances that have been given to you?
A: This is a matter of the US internal policy. They are trying to formulate their own policy. We flagged what the Indian concern is and the Indian concern, specifically on this issue, is we have high skilled professionals who come here. We do not have people coming into the US from India who come here only either for reasons of taxation fraud or are illegal immigrants.
Q: But there are certain entry-level computer works also that have been given out to Indian IT professionals and that is a key area of concern.
A: At the end of the day, it is a policy which the US has to formulate and I am sure they are conscious of the global concerns. It is a part of my job to highlight what our Indian concerns are, which we have done.
Q: Are there any retaliatory measures that the Indian government could initiate because Mrs Nirmala Sitharaman, yesterday, did mention that US companies also have to operate in India, so the US should be mindful of that?
A: I think it is too early to discuss all these hypothetical situations. I do not think we need to either think on these lines or even let alone comment on these lines. We have highlighted the concerns.
After all, the US is a very powerful and important country and a very important partner for India. They are in the process of formulating the policy. Let us see how the policy comes out.
Q: President Trump has also been critical of the multi-lateral agreements that exist, such as Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA). Do you think that this opens doors or creates an opportunity for better bilateral trade or arrangements between India and the US?
A: India was never a part of the TPP and therefore the TPP continuing or not continuing does not have an impact on India.
Q: But bilaterally, it could increase opportunities?
A: Bilaterally, India has been proactive in various kinds of investment deals, trade deals with various countries and the US of course, has been a very important partner for India. Indo-US relationship is something that defies a particular government in power either in Delhi or in Washington. It is a bipartisan sort of a relationship which has improved with every government in power in the both the countries.
Q: Which was also reflected when the Prime Minister was here.
A: Yes. I am sure we will continue to strengthen that bilateral relationship. Our relationship is in various fields. There is a very powerful security relationship that we have. There is a very important economic relationship that we have. There are US companies investing in India. Indian companies are investing in the US. There is a huge amount of trade and our current target is to touch something like USD 500 billion by 2020, the Indo-US mutual trade. If that is the kind of target we are aiming at then certainly, it has to be done in the spirit of cooperation with both the countries.
Q: You have been meeting a whole host of dignitaries, you are also scheduled to meet some long-term investors, what would be the key message that you are sending out to the investors?
A: I think more important than my meetings with them is the fact that the credibility of the Indian economy has been established whereas the world is still struggling in the present situation to get out of the slowdown environment, India for three years in a row has been the fastest growing economy.
India’s ability to take decisions and take difficult decisions now stands well established. I think, the kind of structural reforms taking place in India is more than any other economy in the world. Therefore, you have seen over the last two-three months, notwithstanding the hike in the US Fed rates, investment has been flowing into India. That is what accounts for the strengthening of the Indian rupee itself.
I think the Indian story is a very powerful story to tell but then the meetings do help in conveying that story and I am getting a very positive vibe, a very positive feedback as far as the investors are concerned.
Q: I would come to the issue of foreign direct investment (FDI), currency a bit later but I wanted to ask you about goods and services tax (GST) rollout. You did mention about structural reforms, IMF Chief has welcomed the GST reforms that have been introduced in the country, with the legislative reforms out of the way, do you see that July 1 timeline can still be met?
A: The July 1 looks very likely. It looks likely because the GST council has fixed that tentatively as a date. We of course have a two-two month’s cushion thereafter in any unforeseen possibility but I do not think we will have to rely on that cushioning because the legislative part of the constitutional amendment is over. The laws have been passed, the rules have been framed, the states are now one after the other passing the states goods and services tax (SGST) law and now all that is required to be done is to fix the rate against every commodity. That is a process which is on, we have already given the formulation.
Q: Is it likely to happen by next month?
A: The May 17-18 that takes place, hopefully the people will come to know what the rates are but as it is, everybody has a clear idea what the rates are going to be. Because we have said, take your present level of taxation under various heads, total them up and we will fit you into a slab closest. There will be in manufactured products a slight reduction because the cascading effect of the tax on tax would go away. Therefore, in manufacturing products itself there would be some relieve over the current levels and therefore any industry with a little bit of common sense and intelligence would be able to assess as to which are the four brackets they would fall in.
Q: Besides manufacturing status quo is likely to be maintained as far as rates are concerned.
A: It is not status quo because when you have a net total, the total would be X and we will place them at the slab closest to the X. There would be a marginal increase as far as the services is concerned because it is a single tax between manufactured goods and services and with regard to certain high tax products, which are either the same products or the luxury products as they call them or environmentally harmful products, we have already announced that the highest slab of 28 percent plus the cess component which will go into the compensation mode.
Q: You mentioned about FDI just a short while ago, I wanted to ask you that last year it was the highest ever inflows of FDI in the country, do you expect the momentum to continue?
A: I think it will continue.
Q: Despite the protectionism?
A: Protectionism is a matter of policy. The investors want to invest their money where there is a safer return and a higher return and why should an investor not invest in an economy which is the fastest growing economy in the world where you have rates and returns, which are likely to be higher than what you get elsewhere in the world where infrastructure spending is probably amongst the largest in the world taking place today in India and therefore, I think we are a logical destination for a lot of FDI and the expectation is that we probably beat our own performance last year.
Q: Government took a very bold measure of allowing 100 percent foreign direct investment (FDI) in the defence sector but investments have been a trickle.
A: What happens, defence is a different kind of an industry. We have allowed 49 percent FDI in partnership with Indian companies, which can on a case-to-case basis be increased in certain cases. That is the policy that exists today.
In the defence industry, people do not set up a plant, a defence manufacturing activity unless they have a reasonable certainty of getting an order. The government is almost a monopoly placer of orders.
So, unless somebody has a reasonable likelihood -- you tell somebody that he is going to, over the next 5-10 years, going to supply helicopters or he is going to supply a submarine, it is only when they are assured of some orders that they set up a manufacturing facility.
Now FDI opens the door. It enables people. The next stage is that people must now get the orders in order to set up the manufacturing facility in India.
Q: But there are several big-ticket projects that are in the pipeline like the Future Infantry Combat Vehicle (FICV), single engine fighter jet. Has there been any movement on that?
A: There is a lot of activity, which is going on in the Ministry of Defence. There is an acquisition wing, there is the demand which comes for the various services, there is an acquisition council, which takes all these decisions. We are, both in terms of modernising the equipment as also in terms of policy, moving gradually in a direction where actual manufacturing in India can actually see the light of day.
Q: You will be meeting representatives from the World Bank tomorrow. As far as the ease of doing business index is concerned, India's rankings have not significantly improved. There has been an improvement of only one rank. In addition to that, the credit rating agencies have not upgraded India's ratings since 2007, which is a period of 10 long years. Do you think that it is now time for a review by the World Bank as well as the credit rating agencies?
A: The World Bank continues to make a review. The World Bank, two years ago gave us a significant jump. Last year, it just moved us by one placing. Moved us by some 13-14 paces two years ago. So, we are moving in the direction of being upgraded. That is the first important point.
One has to do business in India to then realise what difference it has made. Is decision making in India today motivated by collateral consideration including corruption? The answer is no. Do you have to wait for years before you get your environmental clearances? The answer is no. Do you have an easy entry in terms of establishing business? All licensing is gone, the Foreign Investment Promotion Board (FIPB) is now being abolished, most investment comes in by the automatic route. Can you exit early? The insolvency law, it permits that.
Where we need to improve, and that is a hard fact, is when you get into the states. Several states have improved their efficiency levels, but in areas such as availability of land, clearance of building plans, that is where our rankings are very low. We are amongst the lowest in the world and therefore, at the level of the states, that is an area where we have to improve if we have to move up significantly, up the ease of doing business ladder.
Q: One of the concerns that the credit ratings agencies at least have had is that of non-performing assets (NPA), particularly of the larger enterprises. The Deputy Governor of the Reserve Bank of India (RBI) has indicated that a new NPA policy needs to be put in place. Is there any sense that you can give to us that by when will such a policy come and what will be the mechanism?
A: Wait for a little time. We are actively working on some solutions in this regard. In fact, if you ask me, with a lot of reforms having taken place, what is the immediate challenge? The immediate challenge is to deal with the problem of NPAs. It is a problem of 20-30 major accounts, which need to be resolved and we are in the process of formulating certain steps. A lot has been done in terms of both, legislative changes and RBI policy, but I think some critical steps are required, which we are on the verge of taking.
Q: Do you think further amendments would be required to specific acts?
A: I would not comment on that, but there is something which is in the offing at this moment.
Q: I wanted to ask you about Vijay Mallya. His arrest is being seen as a big victory for the government. There are news articles which suggest that you had raised this topic with the UK authorities during your visit and you had also talked to them about the kind of coverage that tax offenders are provided within the UK. What was their response? That is one question that I wanted to know.
A: Our discussion is at a political level with the functionaries of the British Government which I have had. But this process is not to be resolved at the political level. This also requires to be resolved through a judicial process that exists in the UK. The UK is known for its fairness and its civility in its administration of laws, etc. and I do not think they can even countenance a situation where anybody who has duped the banks or who has broken the law then finds London to be a new haven.
Q: Given the past track record, do you see the extradition actually taking place?
A: Our agencies have a good case against him. They have followed the correct procedures. It is now for the British courts to execute and take the relevant decisions. It is also a message to various people that now, you have a government and a system in India which will not countenance the fact that you commit a crime in India and merely by skipping through the geographical boundaries of India, you think you can escape the law.
Q: I also wanted to ask you about this committee that is being set up to analyse bitcoins, the underlying technology being blockchain. There are members of the parliament who have indicated that this might be illegal. When demonetisation took place, prices of bitcoin substantially increased. What is your opinion on the issue of this virtual currency?
A: This is not allowed in India. It is very clear. Therefore, we have a committee which is looking into this whole issue and concerns have been legitimately raised by members of parliament. No country can allow a parallel currency. Currency in India can only be permitted by the RBI. It cannot operate outside the system. If it operates outside the system, then you are back to a situation where there is unaccounted currency in the country.
Q: But is the government likely to recognise bitcoin because in the USA, it is actually being seen as a mechanism which can substantially bring in transparency.
A: I do not think so. We have a committee. As of today, it is not allowed in India.
Q: I also wanted to ask you about the NK Singh Committee’s recommendations. There are certain improvements to the fiscal responsibility and budget management (FRBM) policy that have been recommended, also including the repealing of the FRBM act, do you see that as a possibility?
A: We are examining the report.
Q: You see the desirability of setting up a council?
A: We are examining that report. It is only after we finish the complete examination of the report, I will be in a position to make a comment. But all I would say is that the views expressed in the NK Singh Committee, with regards to the downward movement as far as the fiscal deficit is concerned is that legitimate concern and this government in the last three years has a very good track record of fiscal prudence.
It was 4.6-4.7 that was the declared fiscal deficit when we came in. There were many amounts which had to be paid over and above what was in the declared fiscal deficit, we have now cleared most of the payments, we have come down to a situation where we intend to end this year with 3.2 percent, each year it has been coming down and I think the roadmap, which is expressed – there are two views in the committee, one is a steep roadmap and one is a bright path. I think there is commonality in both the suggestions because it indicates a downward movement and I think we are going to maintain that movement.
Q: Does the combine fiscal deficit of the Central government and the states concern you -- and especially prohibition and farm loan waivers?
A: The states after some of the recent Supreme Court (SC) judgements will come under some pressure. That is a matter of concern, it concerns me also because if they lose a significant amount of revenue either in terms of taxes or in terms of tourism, that is a matter of concern for us and I am sure the states are planning their own strategy in this regard. It is a matter of concern but most states, the FRBM is a target of 3 percent as far as the states are concerned and by and large, the states in India have been sticking to the target.
Q: You did mention about currencies initially and Commerce Minister has been pushing for trying to bring the rupee down but with the situation in the USA, do you think that some sort of intervention is possible?
A: I think let the market decide the rate of the rupee. That has been the consistent policy of the government and even when the rupee got strengthened, the month of March saw a record hike in the exports itself. Therefore, the strong rupee will immediately result in exports collapsing that did not happen in the last two months.
Q: I wanted to ask you about inflation, the Monetary Policy Committee’s minutes of its meeting have been made public. There is a discussion and one of the members suggested that there should be hike in the interest rates. Of course that did not happen but are you concerned about the inflation rate going up particularly with the monsoons?
A: I think the monsoon which is predicted by the Indian Meteorological Department (IMD) is a normal monsoon and so far we have stuck to the monetary policy target, which is a statutory target and I do not see any undue hike as far as inflation is concerned unless something abnormal happens.
Q: Your trip to the USA is going to last for another three days, what will be the key message that you would like to send to the community here in the USA?
A: I am here, the World Bank and the IMF meetings are extremely important but then what happens on the side-lines of the meetings, our interaction with investors, our interaction with the ministers etc is also important and the message has already been well received as far as India is concerned. A lot of people are talking about India. There is a good buzz about India and I think my job is to strengthen that message.
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