No timeline for economic recovery, says the Union Finance Minister in Washington

It was Finance Minister Nirmala Sitharaman’s turn in the nearly week-long critical exchange that has unfolded between former Reserve Bank of India (RBI) Governor Raghuram Rajan and former Prime Minister Manmohan Singh on one end and Ms. Sitharaman at the other.

Responding to Mr. Singh’s comments that Ms. Sitharaman ought not to blame the UPA for the state of the economy (the April–June quarter registered a growth rate of about 5%), Ms. Sitharaman told Indian media in Washington DC that she had to discuss the UPA to provide context for today’s situation.

“I respect Dr. Manmohan Singh for telling me not to do the blame game, but recalling when and what went wrong during a certain period is absolutely necessary to put it in context,” adding that things went wrong during a period in which Mr. Singh was Prime Minister and Mr. Rajan the RBI Governor.

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Mr. Singh’s comments were in response to Ms. Sitharaman saying at the Columbia University on Thursday that public sector banks had gone through their “worst phase” during the tenures of Mr. Singh and Mr. Rajan.

“I don't need to put the blame — it’s more than apparent as to when the wrongdoings happened in the banks and which is the government which is spending time to clear the clog from the public sector banks and which is the government which is pursuing all those who have taken money during the UPA government and who have gone out of the country for fear,” Ms. Sitharaman said.

Faced with a severe slowing down in the economy, including across key sectors, a slump in investment, consumption and exports, Ms. Sitharaman had announced a slew of policies – including a cut in corporate tax rates, a rollback in higher surcharges on foreign portfolio investors.

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Asked by The Hindu whether the government has seen signs of recovery and how long to recovery, Ms. Sitharaman declined to put a time frame to it.

“Well, at this stage, I'm not looking at ‘how long’, I'm not expecting to say, ‘Am I looking at green shoots?’ Nothing of that,” she said.

“At this stage it’s my duty to hear every sector and respond as much as they would want us to respond from the government side. So my business is now just to go on listening and making sure that their grievances or their demands are addressed.”

The revenue losses from some of the policies have raised questions on whether the government can stick to its fiscal deficit target of 3.3% of the GDP. Ms. Sitharaman said she was not focussing on the target for now.

“I'm not reviewing it now. Nearer the RE [Revised Estimate, which will be made during the upcoming budget in February 2020], I will do it. At this stage, I do not want to allow that to worry me,” she said. Pressed on whether that meant she was abandoning the target, she said no.

The Minister sounded optimistic about achieving the target of ₹1,05,000 crore disinvestment target the government had announced for FY20 in its June 2019 budget.

“ I'm clear that the DIPAM [Department of Investment and Public Asset Management] is going ahead with everything that has been targeted and there's enough momentum gained by the response that we’ve received for the IRCTC [a catering subsidiary of Indian Railways whose shares recently had a successful IPO] . That’s not really completely ‘disinvestment’, but then the way in which it went about has shown clear indication that the market is ready for it.”

In terms of the engagement with the U.S., Ms. Sitharaman is scheduled to meet Treasury Secretary Steven Mnuchin who will be in India in the first week of November for a financial dialogue. Mr. Mnuchin is also expected to visit Mumbai.

Trade differences narrowing

On India-U.S. trade talks, Ms. Sitharaman said differences between the sides were narrowing.

“I know the intensity with which the negotiations are going on and the few issues on which …some differences are being sorted out,” she said, adding that she hoped a trade deal would be reached soon.

The two sides are continuing to hammer out an agreement after having failed to reach a trade package during Prime Minister Modi’s visit to the U.S. in late September.