In a free-and-frank interview to Swarajya on 30 June, Prime Minister Narendra Modi talked about the challenges faced by the National Democratic Alliance (NDA) government when it took over from the United Progressive Alliance (UPA) in 2014, its approach to economic reforms, especially the privatisation of public sector units (PSUs), the efforts to put Indian banking back on the rails, the political challenges from a Mahagathbandhan against the NDA in 2019, the NDA’s own allies problem, the Kashmir crisis, the alleged concentration of power in the Prime Minister’s Office (PMO) and the Bharatiya Janata Party’s (BJP’s) talent deficit, and many other topics.
In the interview, Modi makes the following points:
One, the economy was in much worse shape than he had imagined, and some of the budget’s numbers were “suspicious”. Put simply, he implied that the budget numbers left behind by former finance minister P Chidambaram were not a correct statement of the finances of the government. But Modi decided that he would not play politics with these numbers, since the country could not afford to “multiply the distress”.
Two, on the lack of jobs, he said that “more than a lack of jobs, the issue is a lack of data on jobs”. This is what needs fixing first. Moreover, with data from the Employees Provident Fund Organisation showing a rise in formal sector jobs, informal sector jobs too would have risen, as would jobs created by Mudra loans. He added: “our traditional matrix of measuring jobs is simply not good enough to measure new jobs in the new economy of New India.”
Three, the farm distress issue, and the promise of doubling farmers’ income are being addressed in a four-fold strategy, which involve cutting inputs costs, raising prices of produce, ensuring minimum harvest and post-harvest losses, and creating more avenues for income generation. “If you focus closely on our policy interventions, they are aimed at helping farmers at every step – beej se bazaar tak,” he told Swarajya.
Four, the government’s internal security strategy is showing result in the Maoist-affected areas, but in Kashmir, now that Governor’s Rule has been imposed, the focus will be on “good governance, development, and accountability”, with the government-appointed interlocutor, former Intelligence Bureau chief, Dineshwar Sharma providing the necessary feedback on the way forward for peace in the Kashmir Valley.
The following is the first segment of the full text of the interview given to Swarajya’s Editorial Director R Jagannathan, CEO Prasanna Viswanathan, and Publisher Amar Govindarajan. A part of the interview, relating to Modi’s views on the goods and services tax (GST), was published on 1 July as it coincided with the first anniversary of the biggest tax reform in Indian history.
Swarajya: In 2014, we thought that the Modi government would bring out a White Paper on the state of the Indian economy. However, nothing of that sort happened. Why didn’t you do it?
Narendra Modi: You are absolutely correct when you say that it was the opinion of various experts and political pundits that a White Paper should be published on the economic situation in the country.
In 2014, one of the key agendas of the BJP’s election campaign was highlighting the dismal management of the Indian economy, ironically under an ‘economist’ prime minister and a ‘know-it-all’ finance minister.
We all knew that the economy was in the doldrums but since we were not in government, we naturally did not have the complete details of the state of the economy. But, what we saw when we formed the government left us shocked!
The state of the economy was much worse than expected. Things were terrible. Even the budget figures were suspicious.
Swarajya: Why didn’t you highlight these suspicious bits?
Modi: When all of this came to light, we had two options – to be driven by Rajneeti (political considerations) or be guided by Rashtraneeti (putting the interests of India First).
As you would remember, I had clearly said during the campaign ‘Saugandha Mujhe Is Mitti Ki, Main Desh Nahi Jhookne Dunga’. Our government has lived this promise.
Rajneeti, or playing politics on the state of the economy in 2014, would have been extremely simple as well as politically advantageous for us. We had just won a historic election, so obviously the frenzy was at a different level. The Congress party and their allies were in big trouble. Even for the media, it would have made news for months on end.
On the other hand, there was Rashtraneeti, where more than politics and one-upmanship, reform was needed.
Needless to say, we preferred to think of ‘India First’ instead of putting politics first. We did not want to push the issues under the carpet, but we were more interested in addressing the issue. We focused on reforming, strengthening and transforming the Indian economy.
Swarajya: Would disclosure have made things worse?
Modi: The details about the decay in the Indian economy were unbelievable. It had the potential to cause a crisis all over.
In 2014, industry was leaving India. India was in the Fragile Five. Experts believed that the ‘I’ in BRICS would collapse. Public sentiment was that of disappointment and pessimism.
Now, in the midst of this, imagine a White Paper coming out giving intricate details of the extent of damage. Instead of being a mollifier, it would be a multiplier of the distress.
There were several landmines laid in various sectors. We accepted this uncomfortable truth and hit the ground running from the very first day to stabilise things so that the Indian economy can be strengthened for the long haul.
We tolerated a number of political allegations, we accepted political damage but ensured no damage to our country.
The positive results of our approach are for everyone to see. Today, India is the fastest growing large economy of the world with strong fundamentals to propel further growth. Foreign investment is at an all-time high, GST has revolutionised the tax regime, India is an easier place to do business than ever before and, most importantly, we are seeing unprecedented levels of trust and optimism.
Swarajya: We will discuss some of these issues. But the challenge No 1 is jobs. Where are the jobs? The opposition is finding traction in asking this question…
Modi: On this issue, more than a lack of jobs, the issue is a lack of data on jobs. Our opponents will naturally exploit this opportunity to paint a picture of their choice and blame us. I don’t blame our opponents for blaming us on the issue of jobs, after all no one has an accurate data on jobs. Our traditional matrix of measuring jobs is simply not good enough to measure new jobs in the new economy of New India.
Swarajya: So, how do we measure jobs? Where do we go from here?
Modi: When we look at the trends in employment in our country, we need to keep in mind that today, the interests and aspirations of our youth are diverse. For example, there are close to 3 lakh village-level entrepreneurs, who are running Common Service Centres across the country and also creating more employment. Start-ups are working as job multipliers and there are around 15,000 start-ups, which the government has helped in some way, and there will be many more operational. Aggregators of various kinds employ thousands of youth.
If we look at numbers for employment, more than 41 lakh formal jobs were created from September 2017 to April 2018 based on EPFO payroll data. According to a study based on EPFO data, more than 70 lakh jobs were created in the formal sector last year.
Now, you know that informal sector constitutes around 80 per cent of all jobs. We also know that job creation in the formal sector can have a spinoff effect on job creation in the informal sector too. If 41 lakh jobs were generated in the formal sector in eight months, how much would be the total formal plus informal sector jobs?
Swarajya: But experts still doubt this way of measuring jobs…
Modi: India had around 66 lakh registered enterprises from Independence till July last year. In just one year, 48 lakh new enterprises got registered. Will this not result in more formalisation and better jobs?
More than 12 crore loans have been given under Mudra (micro loans). Is it unfair to expect that one loan would have created or supported means of livelihood for at least one person?
More than one crore houses have been constructed in the last one year; how much employment would this have generated? If road construction has more than doubled per month, if there is tremendous growth in railways, highways, airlines, etc, what does it indicate? Is it possible without employing more people in equal proportions?
A recent international report showed how quickly poverty in India is declining. Do you think that is possible without people having jobs?
Swarajya: But your opponents doubt the data…
Modi: There is a lack of consistency in the political debate around job creation. We have data put out by state governments on employment. For example, the previous Karnataka government claimed to have created 53 lakh jobs. The West Bengal government said it created 68 lakh jobs in the last term. Now, if states are all creating good numbers of jobs, is it possible that the country is not creating jobs? Is it possible that states are creating jobs but the Centre is creating joblessness?
Swarajya: Let us discuss farmers, where there is a lot of anger… Every government routinely claims that it is committed to the farmers. What is it that you are doing which is different from the previous government?
Modi: We have a stated aim of doubling farmers’ income by 2022 to make our farmers prosperous and agriculture profitable.
To make our farmers prosperous, we need to augment their sources of income and decrease the risks they face.
We are following a four-pronged strategy to achieve the goal of doubling farmers’ income: decrease the input costs, ensure proper prices for the produce, ensure minimal harvest and post-harvest losses, and create more avenues for income generation. If you focus closely on our policy interventions, they are aimed at helping farmers at every step – Beej Se Bazaar Tak.
The previous government allocated Rs 1.21 lakh crore to agriculture while we have allocated Rs 2.12 lakh crore in the five-year period. But unlike them, our initiatives do not stay limited to the files, but enter the field.
Swarajya: Can you given examples..
Modi: If you want an idea of what changed under our government, just remember the condition of farmers during those years. They were forced to do farming which was unscientific, they had to often bear the brunt of lathis for obtaining urea, they did not have a proper crop insurance cover, nor did they get proper prices for their produce.
To make farming scientific, farmers are now equipped with soil health cards. Shortage and scarcity of urea is a thing of past and neem-coated urea is improving productivity. Now the farmer has a holistic crop insurance cover with PM Fasal Bima Yojana.
Swarajya: What about minimum support prices?
Modi: Not only will the farmers get minimum support price of 1.5 times their cost, they also have more avenues to get the right price with the help of e-NAM (the electronic National Agricultural Market, which provides price, production and market information to farmers).
I would also like to urge the private sector to increase investment in agriculture. In India, private sector investment is only 1.75 per cent of total investment in agriculture. From technology to food processing and from modern machinery to research, there is huge scope for the private sector. If the market savviness and global best practices orientation of the private sector meet the hard work and determination of our farmers, it is a win-win for both the farmers and the private sector.
Swarajya: You recently met leaders of India Inc to discuss their issues. What did you tell them and what did they tell you? Did they have grievances over GST, the insolvency process, etc?
Modi: The meeting with captains of industry was extensive. The Government of India made a presentation. We had a frank discussion on aspects relating to the Indian economy and the road ahead. Several constructive suggestions emerged from the discussions.
The issues we discussed revolved around how the corporate sector can further contribute to India’s growth. Take for example the agriculture sector. I have said it in another question during this interview that corporate involvement in agriculture is low in India. I feel this is an area where lots should change.
We deliberated on the need for more Indian enterprises to get involved in the defence sector. The Government of India has undertaken so many reforms in this sector, including scope for more FDI, less bottlenecks, etc, so the corporate world should now rise to the occasion and invest. So many years after Independence why can’t India have enhanced capabilities in defence manufacturing?
Business leaders said that what we are doing (reforms like GST and bank loan resolution through bankruptcy courts) is removing the bad elements in business and that is good for business.
Swarajya: Don’t you feel you could have done better in two areas: fixing India’s banks. Instead of recapitalising them in 2017-18, why didn’t you do this in 2014 itself? And then there is half-hearted privatisation. The failure of the recent Air India privatisation is a case in point…
Modi: You are wrong.
We had identified the problem with banks in 2014 itself. A retreat of bankers was held in Pune where topmost officials attended. I told them to go about their work with utmost professionalism and clean the sector. I assured them that the long-standing culture of phone calls from Delhi influencing their working is not the way our government works. This is what enabled the true state of affairs to come out.
Earlier, if someone owed Rs 500 crore and when it was time to repay that loan, a phone call from Delhi would ensure another loan of Rs 500 crore is given so that the previous loan was repaid. This cycle persisted. We stopped this. This is why the old loans had to be shown as NPAs.
Now (with the Insolvency and Bankruptcy Code), many businessmen have had to lose their companies for failing to pay bank dues.
Bank mergers were merely being talked about before, but not implemented. But we have moved ahead. Did you not see the merger of five banks?
Swarajya: You don’t seem too keen on privatisation… The case of the recent (failed) privatisation of Air India, for example.
Modi: I request you to check your facts. Our government has undertaken significant disinvestment. You can research more on this and you will come to this conclusion too.
As for Air India, the government has done what it had to with utmost sincerity. You have to differentiate between the lack of response to one sale offer and a policy decision. At the cabinet level, we have cleared the sale of not only Air India but several other (loss-making) public sector units – this itself is a historical in many ways; that they are yet to be sold is the result of timing and process. We don’t want to make a sale where we will be accused of selling something for X amount when we could have got more. But the policy decisions for strategic sales have already been taken.
Swarajya: Before 2014, you talked of Minimum Government, Maximum Governance? Can you expand on how you have moved towards this goal? What exactly did you mean by this phrase?
Modi: I have always believed, and said it on multiple occasions, that less dependence on governments is the way ahead.
A government needs to maximise productivity and optimise processes. It has to play the role of an enabler and not an obstructer.
We have translated this philosophy into action over the last four years. Technology plays an important role in achieving this aim.
The end objective of ‘Minimum Government, Maximum Governance’ is to make the lives of people hassle-free, often by removing the hindrances a government can create and to let people achieve their full potential.
Swarajya: Can you give us examples?
Modi: Take, for example, the move of making self-attestation for submission of document copies. Earlier, people had to look for notaries or gazetted officers and request them for attestation. Often, they even ended up paying a Rs 50 or 100 for this. Now, we have shown that the government trusts its people, we reduced a layer of government and it was a relief to crores of people.
While many governments are proud of making new laws, I am proud of abolishing archaic laws. More than a thousand archaic laws have been done away with.
We also scrapped interviews for Class 3 and Class 4 jobs in the government. One less layer of government, one less avenue for nepotism and corruption, and a boost to honest candidates.
We abolished the Foreign Investment Promotion Board (FIPB) and most of the FDI approvals happen through the automatic route.
Swarajya: What about ease of doing business?
Modi: For ease of doing business, the earlier mandatory 56 registers maintained under various labour laws have now been replaced by five common registers and 36 forms have been reduced to 12. All the existing labour laws are being simplified, rationalised and amalgamated into four labour codes.
Processes for incorporating a company have been simplified and it is now possible to get it done in 24 hours.
Building approval procedures from municipal authorities has been reduced – from 24 to eight in Delhi and 37 to eight in Mumbai. The entire process of application and approval at all stages of construction has been made online and no personal visit or contact is necessary. Requirement of affidavit has been done away with and replaced by e-undertaking. This is being extended to all urban local bodies.
We have started a system of online application and approval for environmental clearances which used to be stuck in delays earlier.
GST has been designed to eliminate Inspector Raj with the help of information technology. From returns to refund, everything happens online.
On the Shram Suvidha portal, multiple labour compliances can be logged at one place. Labour inspectors are also disallowed from swooping down on companies, instead they are now guided by a computerised system that sends them on inspections based on objective criteria.
In most government schemes, we have eliminated a layer of government by making fund transfers through direct benefits transfer (DBT) or cash transfers.
I can go on and on about such measures, but perhaps you will have space constraints. So, let’s move to the next question.
Swarajya: A year ago, you launched the GST claiming it as a good and simple tax. We believe it is certainly a good tax, but critics say it is too complex. They say that the tax should ideally have had one single rate. Your comments:
Narendra Modi: Trust Swarajya to begin with a leading economic question.
It would have been very simple to have just one slab but it would have meant we could not have food items at zero per cent tax rate. Can we have milk and Mercedes at the same rate? So, when our friends in Congress say that they will have just one GST rate, they are effectively saying they will tax food items and commodities, which are currently at zero or 5 per cent, at 18 per cent.
Swarajya: What are the benefits so far, according to you?
Modi: Let me start with some numbers.
The number of enterprises registered from Independence until now was 66 lakh. In just one year after the introduction of GST, the number of new enterprises registered is 48 lakh. Around 350 crore invoices were processed and 11 crore returns were filed. Would we be looking at such numbers, if GST were indeed very complex?
Check-posts across the country have been abolished and there are no more queues at state borders. Not only are truck drivers saving precious time but also the logistics sector is getting a boost and thereby increasing the productivity of our country. Would this be happening if GST was complex?
Swarajya: Why do we still hear so much criticism from business and economists?
Modi: GST was a massive change, requiring a complete reset of one of the world’s largest economic systems. The reform merged 17 taxes, 23 cesses into one single tax. When it was finally introduced, it was our endeavour to make it simple and ensure sensitivity of the system. There are often teething troubles seen when a reform of this magnitude is carried out, but these issues were not only identified but also addressed in real time.
Swarajya: GST is still a work in progress even after one year.
Modi: GST is an evolving system and we calibrate based on feedback from state governments, people, media, etc. A lot of feedback from the people, traders, etc, has been incorporated.
The GST has seen Indian cooperative federalism at its best. We consolidated the states and developed proactively a consensus, where earlier governments had failed.
Swarajya: Will we see rates coming down further?
Modi: Talking about rates, earlier many taxes were hidden. Now, what you see is what you pay. Government has reduced taxes on nearly 400 groups of items. Around 150 groups of items have zero per cent tax rate. If you look at the rates, for most of the day-to-day commodities, the rate has actually come down. Be it rice, wheat, sugar, spices, etc, total tax levied has been reduced in most cases. Large number of items of daily usage are either exempted or in 5 per cent slab. Some 95 per cent items fall in/below the 18 per cent slab.
Swarajya: Is GST in any way linked to your economic philosophy of minimum government?
Modi: GST has been designed to eliminate Inspector Raj with the help of information technology. From returns to refund everything happens online.