Bhartiya Janata Party (BJP) continues to oppose the opening of retail sector to foreign investors as it will affect millions of small traders and result in job losses. Speaking to CNBC-TV18's Shereen Bhan, about BJP's economic policies, BJP spokesperson Arun Jaitley said the party is against allowing FDI in multi-brand retail but may selectively accept FDI in defence.

The Cabinet in September 2012 had approved up to 51 percent FDI in multi-brand retail, while empowering state governments to independentaly decide if they want to let international chains set shops.

Recently, Arvind Kejriwal-run Delhi government had blocked FDI in retail leading to speculations that it will lead to a fall out with Congress.

The conversation veered around BJP’s stand on other contentious subjects ranging from coal scams to gas pricing to mining mess. While Jaitley thinks mining ban is a huge challenge, he suggests scrapping of coal block allocations as the only option to get around the issue.

Also Read: 90% chance of BJP-led NDA coming to power: Sardesai

Below is the edited transcript of Arun Jaitley’s interview with Shereen Bhan on CNBC-TV18.

Q: What to your mind is going to be the big economic priority, the number one challenge that you will face you believe if you were to come to power as far as the economy is concerned?

A: What has happened in the last few years is a loss of confidence in the Indian economy. Investors internationally have lost confidence, investors domestically have lost confidence. The credibility of the governmental decision making process itself has suffered. You have projects which have been held up for years together, not been cleared. You have decisions of a political priority which are aimed more at generating votes rather than rejuvenating the economy which had a priority in this government.

As a result of this, you are now approaching a situation where the present government – when it goes out – hopefully it does go out, leaves behind a growth rate of less than 5 percent – that is my all likelihood situation. What you need to get back is a momentum in the Indian economy. Obviously, if there is a political change today - as the world expects it to take – that itself will be a significant development.

Q: Because your prime ministerial candidate, Modi has said time demands a new tax reform. He has not then gone on to specify by what he means by that. But I also want to put to you what seems to be a difference within the BJPs senior leadership as far as this Arthakranti proposal of abolishing all taxes, replacing that with a banking transaction tax. Sushma Swaraj has termed that proposal as fantastic and she believes that it requires only will power to be implemented. Nitin Gadkari argues, if we apply the banking transaction tax, we will get revenue of Rs 40,000 lakh crore. Where do you stand on this? Will this be part of the BJPs manifesto to abolish all taxes and replace that with a banking transaction tax?

A: The BJP has not accepted the whole concept of a banking transaction tax. There have been suggestions made by the Arthakranti to the BJP. I can tell you that the proposal on the face of it sounds very popular and very attractive. However, I am quite conscious of the huge number of difficulties which are there in implementing such a proposal. Therefore, the BJP as a responsible party is not going to jump to it and say without really going through such a proposal, without really figuring out what the figures are going to be, the consequential spiral effect of this is going to be to jump in and accept this. Therefore, BJP has nowhere stated for the moment that this is a part of the BJP manifesto or BJP is going to accept it. Of course it sounds a very attractive proposal, but one has to examine it at length, there has to be a considerable debate in the country and I don’t think we have gone through that process as yet.

Q: You don’t agree with Sushma Swaraj and Nitin Gadkari?

A: They have made their own suggestions. I have recently at the Institute of Chartered Accounts delivered a speech in the presence of Baba Ramdev where I raised a few questions about this whole proposal which were there in my mind. While I do concede that Indian tax systems need simplification, they need rationalisation, they need a lot of freedom from the inspector raj, but at the same time unexplored proposals cannot be accepted on the face of it till they are fully examined.

Q: Is Rajasthan now going to turnaround and say like the AAP government in Delhi that we don't want FDI in retail; we are going to do a U-Turn?

A: You will have to wait for the Rajasthan response, but effectively don't forget the central government when it brought in the policy, one of the ingredients of the policy was we are not making it mandatory for the whole country, we are leaving it for the states. When repeatedly Anand Sharma said so, I don't think anybody can have a grievance if one state government today turns around and says I am not going to accept it.

Q: Are you or FDI in defense, do you believe that 26 percent cap on a case to case basis is acceptable to the BJP, would you like to do more?

A: I have absolutely no problem with FDI in several areas. I have no difficulty as far as FDI in infrastructure and defense is concerned. Today most of our defense purchases are made from companies which are entirely outside the country. So 100 percent foreign companies are supplying the defense equipment or foreign government held companies are supplying the defense equipment. If we have a company in India in which there is a foreign shareholding of a certain percentage, I have absolutely no difficultly with that. Therefore as far as FDI in several areas is concerned, the BJP has absolutely no difficulty with that, but it is FDI sector wise in some areas that we are concerned with and certainly FDI in retail is one of those areas.

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Q: Can you give us a timeline if you were to come to power by when we could actually see the GST being implemented because that is going to add at least a percent or two percent to the GDP. So is this going to be one of the key priorities if the BJP were to come to power to roll out the GST and do you have a broad timeline in mind?

A: The GST is not a BJP versus Congress issue. I personally am quite convinced about the virtues of the GST. There are some states which are lesser consuming states which certainly had concerns as far as the UPA government is concerned and its fairness to implement the GST as far as the states are concerned. Now in Madhya Pradesh there is a problem, there were BJP and NDA governments which supported the DST proposal, there were NDA governments which opposed the GST proposals.

Therefore, there were governments of the same party other than the NDA also where two states could take a conflicting view. This was based on the fact that there was a certain amount of loss of confidence in the central governments ability to be fair to the states itself. The MP government had a principled position in the opposition as to whether the states are in a position to really give up their rights of tax collection and leave it to the central government.

Shereen: My question very simply is will the GST and the GST implementation be a part of the BJP’s manifesto, are you going to make a promise of implementing GST in your manifesto?

A: I cannot tell you what will be in the manifesto but I can only indicate to you at this stage when the manifesto has not been announced that if GST is implemented in this country, it will require a consensus as far as the states are concerned. And to build that consensus, the Central government will have to instill a certain level of confidence in the states that we are going to be fair to all of you.

Shereen: Let me now move to the other issue that is controversial and that is the policy for allocation of natural resources. You have said that there should be a transparent policy for allocation of natural resources, what does that mean, is the BJP going to push for auction and is the auction methodology going to be the process as far as all allocation of natural resource is a concern, be it spectrum, coal, etc?

A: It may depend from sector to sector but I think we have to come out with a non-discretionary policy. Allocation of natural resources in this country, the price at which they are to be allocated, the purpose for which they are to be allocated - these are all relevant considerations, which will come in. Eventually, we have seen that some of the major controversies in this country have been over allocation of natural resources whether it was the spectrum or it was the coal block, the controversy has been with relation to that.

When you talk in terms of a non-discretionary, non-discriminatory basis obviously auction appears to be a very logical cause and we are converging towards the situation where when you select a non-discretionary basis you move in that direction otherwise what is the effect.

For the last six-seven years, coal blocks were allocated, today you have a stalemate as a result of which power sector in India itself is suffering. Therefore, I think it will be a top priority as far as any alternative government is concerned to clean up the mess in which the coal block allocations are either scrap them, go in for an auction and then at least start the process.

Shereen: Are you in favour of scrapping the block, are you in favour of deallocation of coal blocks?

A: The way the situation has now stalemated itself, I think it is proving to be very costly as far as the Indian economy is concerned. Speaking for myself personally, I don’t see any other option.

Shereen: So you are saying that there is no other option but to scrap the allocation of the current coal blocks given the mess?

A: Because even otherwise the present government in order to clear up the mess which it itself had created is scrapping a very large number of them. Therefore if you want to retain some, which were the public sector etc, you may consider it selectively but otherwise if the mess is so large then you will probably have to write on a clean slate and start afresh.

Shereen: Since we are talking about coal, let me talk to you about the other controversial issue and that is mining and we have suffered huge losses on account of that Supreme Court order which has banned mining - in fact Goa chief minister, Manohar Gopalkrishna Prabhu Parrikar has been almost on a campaign to try and get that mining band lifted. If you were to come to power, what is your position going to be as far as mining is concerned specifically in terms of checks and balances and a policy as far as mining is concerned?

A: I think we will have to formulate that policy but speaking for myself at this stage, I think we have landed ourselves into a huge mess as far as mining is concerned.

It is a valuable natural resource, it also has a potential to become a scam and as a backlash you stop everything. When you stop everything you have large unemployment, you have a resource which is going waste and therefore you will have to again go back to the same principle that I indicated, which is effectively a non discretionary, non discriminatory method of allocating mining and making sure that the law itself is observed. How much do you link it to actual users, which are the areas you can link it to actual users and which are the areas where you can allow other trading companies to come in and start mining? I think we will require a definitive answer now from the government.

Shereen: I also want to get your comments in as far as the whole gas price issue is concerned because the BJP hasn’t commented publicly on the gas price issue. The new gas prices will come into effect from April 1. Is the BJP in favour of market determent gas pricing?

A: If you recollect, Yashwant Sinha is the chairman of the standing committee on finance had in that capacity spoken, which was the BJP stand and ask the government to reconsider the pricing at which they had based it on. I think the government has reiterated probably or in the process of reiterating that same decision. So, to say that the BJP has not commented on it itself, may not be very accurate.

Shereen: The government has notified the new gas price which comes into effect from April 1. So, are you saying that the BJP is not in favour of a market determined gas price?

A: At the present stage, I don’t think there is a situation where the BJP would like to rock the boat itself but at the same time the pricing itself will have to be fair and not in anyway of a nature where there is a windfall profit as far as individual companies are concerned.

Shereen: You have no problem rocking the boat on retail but you have a problem rocking the boat as far as gas is concerned even though your party leader does believe that it shouldn’t be linked to the market?

A: As far as retail is concerned don’t forget that you have a very large number of people – 4 crore traders in this country, you are looking at almost 20 crore people which is broadly one fifth of one sixth of India\\'s population, the largest employer after agriculture. Therefore if that is a section which is uncomfortable about a particular policy, we have opposed it as far as day one is concerned.

Pricing of certain commodities may be a matter of policy. As far as opening this sector is concerned, I think goes to the core of livelihood of a very large number of people and this is one area on which the BJP has never had shifty stand. We have been crystal clear that we are opposed to the implementation of the retail FDI at the moment.

Shereen: I want to get back to the populism versus prudence debate. An example of populism you gave was the agri debt waiver but I understand that the BJP is also perhaps considering slashing of agri credits as being of the poll promises that you make. Can you elaborate for us what exactly your position is going to be?

A: As far as credit availability to the farmers is concerned we are certainly in favour of very soft credit being available to the farmers. Therefore, there are BJP states which have made credit available at a very nominal percentage – 4 percent and then it came down to 2 percent. One of the state government’s has almost made credit available without any interest rates. Therefore, soft credits to help the farmers, is what the BJP and the BJP president have been repeatedly saying.

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Shereen: I also want to come to another poll promise that you are likely to make in your manifesto and that is increase the manufacturing share to more than 20 percent of gross domestic product (GDP). It is a promise that you have talked about in the past, it is a promise that the UPA government made in its last two manifestos as well. Specifically, what do you intend to do to take manufacturing share to 20 percent of GDP, if you can give me specifics?

A: There are several steps India requires to take as far as manufacturing sector is concerned. Manufacturing is where bulk jobs are likely to be created. Therefore, as far as manufacturing is concerned to speak in terms of rationalisation of interest rates, you can’t have a high interest rate regime where the cost of capital is non competitive.

When Vajpayee’s government was there we saw a long phase of soft interest regime, concentration on infrastructure, trade facilitation. Now, these are areas where you can slowly – it takes time but you can slowly move in a direction. I am quite conscious of the fact that labour flexibility in India is politically very challenging as a reform and therefore I am not for the moment saying that I am very confident that government will be able to do that very easily. For some of the other areas like setting up of the manufacturing corridors or zones and implementing some of these areas which I have just indicated in order to make India a hub of low cost manufacturing the way several other Asian economies have done.

Shereen: I go back to the Arthakranti proposal because it is a divided house in the BJP as far as taking that banking transaction tax proposal forward. Give me an idea of revenue mobilisation ideas that the BJP is going to take forward because if you are not likely or you are not going to be keen to hike taxes, what are going to be the new and innovative ideas as far as revenue mobilisation is concerned?

A: Let me be very clear to say that the BJP is a divided house on banking transaction tax - from a news point of view may appear attractive to you. BJP is certainly not a divided house as far as this issue is concerned. A proposal has been made to us by a particular, very enthusiastic group. We are seriously considering it, we are discussing it, we are aware of the complications involved in the proposal and therefore we are not immediately jumping as far as that proposal is concerned. However, the populism and the attraction in that proposal makes it worthy of consideration. That is all I have said. BJP certainly is not a divided house.

The BJP is not for a very high tax regime. As far as taxes are concerned and therefore the extent of revenue mobilisation in this country, the way our economy today is structured is essentially going to depend on enlargement of economic activity.

Shereen: Are you going to push for more disinvestment and are you going to bring back privatisation because the UPA ran away from the idea of privatisation. You privatised companies when the NDA was in power. Will disinvestment lead to privatisation as well if the BJP were to come to power?

A: The BJP has absolutely no taboo as far as privatisation is concerned. It will depend from company to company, sector to sector whether you disinvest in small quantities as the UPA has done or if there is a particular sector in which you need to privatise the company. As far as we are concerned, we have absolutely no difficulty.

The UPAs problem itself was they campaigned against the privatisation of the NDA, which I have no hesitation in saying was a highly successful program. They put it in their manifesto that there will be no privatisation and therefore they had bound themselves by a proposal where they kept on trying to disinvest but not privatise.

Shereen: You will go the privatisation route if you do come to power?

A: I am not saying that. We will have to see from different companies, a different sector point of view as to what is to be done in those situations.

Shereen: If you do come to power, commerce, finance what would your heart desire or law even?

A: I have absolutely no desire. My only one desire is to make sure that this present government leaves. And as far as India gets a respite from non-governance that we have seen in the last few years and therefore we have an effective government in place. That is our priority at the moment. Who gets what responsibility, if at all I think is a consideration which arises much later.