Stimulus a continuous exercise, more interventions at the right time: Ajay Bhushan Pandey, Finance secretary

Finance secretary Ajay Bhushan Pandey has said stimulus measures were a continuous exercise and that the government would announce more interventions, as required, at the right time. In an interview with ET, Pandey said that sector-specific steps need to be taken directly, not by way of taxation. Edited excerpts:

FM has talked of more stimulus measures. What could be contours?

Our entire approach during the last five-six months has been to intervene in a phased manner, targeting and addressing the need of the hour instead of giving it all in one shot. We are closely monitoring the area, the sector, the population group, and the class of industry that require intervention. Measures such as loan waiver and additional working capital announced in March-April have aided business recovery. There was pent-up demand, but industry and businesses were able to respond through an adequate supply of stocks. They survived due to those timely interventions. We expeditiously released Rs 2 lakh crore as refunds under GST and Income Tax. Income tax refunds of about Rs 1.27 lakh crore and Rs 40,000 crore of GST refunds have been issued so far, even though our revenue has been impacted. The stimulus is a continuous exercise. FM (Nirmala Sitharaman) has also said that we are constantly monitoring and interventions, as required, would be announced at the right time.

Which sectors need intervention?

We have received feedback from industry bodies. There are certain stressed sectors like hospitality, tourism, and various others that are being identified. Now that the economy is coming back on track and speeding up, the question is, how do we promote domestic investments and domestic manufacturing. We have announced PLI (Production-Linked Incentive) scheme for some sectors. We have received some suggestions about whether PLI can be expanded to some more areas. The government will respond, as this scheme is differently designed. This is targeted delivery of incentives, just like DBT (Direct Benefit Transfer).

Can GST rate rationalisation be considered for stressed sectors?

When GST was introduced, the revenue-neutral rate was about 17%. As per a study by the RBI, it is around 11.3% now. Another issue is that of an inverted duty structure, which has led to delays in refunds. So, some industries — wagon manufacturers and plastic bag manufacturers — have sought an increase in rates. The textiles ministry has been requesting to remove the inverted duty structure in the sector. The GST Council in-principle agrees with this, but it is a question of timing. These structural changes will also need to come and benefit the industry.

Some states have yet to opt for the borrowing option given by Centre….

In the first tranche, the interest rate for borrowing was 5%. We are trying to have a dialogue with the remaining states. We hope they will also come forward and avail of this. We have tried to attend to every state in every possible manner. That is the reason why certain relaxations were given in borrowing limits. The government decided to borrow, and we will pass it on to states. States do not have to individually borrow at differential rates. So, all those problems have been completely sorted out. On revenue loss and other aspects, one can have discussions.

The government has given tariff protection to incentivize local manufacturing. Is there thinking about having a sunset provision?

We do not consider Customs duty merely as a source of revenue. It is also a tool to provide a level playing field for the local industry. It is also a misconception that the customs duty rates are very high. Our annual import is Rs 30 lakh crore and customs duty collection is about Rs 1.3-1.4 lakh crore. The average custom duty rate in India is about 3-4%. Only on certain commodities, it has been kept high because we don’t want our domestic producers to be impacted.

If we want to promote any sector that is facing challenges from outside, then at the beginning of the initial few years some nominal customs duty can be imposed. That has to be done in a gradual manner. But then, you should have a clear vision that after X number of years, the duty should be phased out. After a few years, when we have fully established our manufacturing, we would want our industry to be competitive. Those duties will then have to be withdrawn. If the interest of consumers, country, and those investing in India is to be balanced, then, those duties will have to be withdrawn.


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