Official Spokesperson (Shri Syed Akbaruddin): Good afternoon friends and thank you very much for coming here towards the end of the week.
As you are aware, this is a briefing about the forthcoming G20 meeting in St Petersburg. We have here with us Deputy Chairman Mr. Montek Singh Ahluwalia, who is the Sherpa of the Prime Minister for this meeting. Along with him is Mr. Dinesh Bhatia, Joint Secretary from the Ministry of External Affairs who is the Su Sherpa. Further to his right is Ms. Usha Titus, Joint Secretary from the Ministry of Finance. She also is the Su Sherpa.
What we will do is I will request the Deputy Chairperson to make a few opening remarks following which we will open the floor for questions relating to the G20. I am certain that you would also like questions on other issues. So, after the closure of the questions on the G20, the Deputy Chairperson has agreed to respond to a few questions on other matters.
With those introductory remarks I will ask the Deputy Chairperson to make his opening remarks.
Deputy Chairman, Planning Commission (Dr. Montek Singh Ahluwalia): Thanks very much and thank you all for coming.
There is not much to be said in the opening remarks other than to say that we are heading out to a very important summit meeting at Saint Petersburg. As you know, the G20 was constituted to be the premier international forum for discussing international economic issues, and that is going to be the agenda. There are lots of international economic issues that are concerning many people. So, we are looking forward to a really good meeting.
It is going to be a two-day meeting. The Heads of Government will come. Out of that, based on various discussions some of which have actually started and they will now intensify in the next two days when the Sherpas and Finance Deputies meet, we hope that at the end of it we will have a sort of Saint Petersburg Action Plan which will sort of indicate how do the G20 see the top priorities for the coming year.
Since I am about to head out there tomorrow, I cannot anticipate what will happen in these meetings. But I would be very happy to give you our perspective on whatever questions that you have. So, questions.
Question: This is specifically related to the G20. There has been a build-up of expectations in a lot of commentary over the past four to five weeks that (1) India is considering approaching multilateral institutions for support to counter the ongoing economic issues that it faces, and then (2) two days back, in fact yesterday, there have been reports quoting Finance Ministry officials, advisors, that as far as currency is concerned this is going to be a specific issue that will come, a currency swap arrangement, which in fact there was something that we had already operationalised a year back and have not utilised from countries like Japan. Could you offer us details on whether you are going to take up and approach the issue of currency stabilisation in any manner whatsoever at the G20 deliberations? And from your point of view, from the country’s point of view, what are the other points that you would like to bring on the agenda there?
Deputy Chairman, Planning Commission: You asked I suppose questions on the same subject but triangulating from different ways. So, let me respond. At one stage you seemed to be asking whether we are using this summit to approach the multilateral institutions. Presumably you had in mind approaching them for some sort of financial assistance. Categorically – no, that is not on the agenda. And my personal view by the way is that we do not need it either. If we ever needed it, of course we have done it before and we can do it again. But I can assure that as far as I am concerned, this is not at all on the agenda. This will not be discussed.
It is a different issue that the role of multilateral institutions vis-Ã -vis emerging market countries, that of course will be discussed. But it is not an India-specific issue and certainly not connected with any of the currency volatility that you have seen.
Then you talked about Finance; Finance Ministry officials should speak for themselves. But as far as currency swap arrangements are concerned, you mentioned the one we have with Japan. It is there. That is not something that we would be discussing in the summit for sure.
You also mentioned something on which a decision had been taken and I think you have in mind the possibility of a currency swap among the BRICS, and that has been discussed. Again it would not be on the agenda of the summit. But it is quite possible that the BRICS leaders – they usually meet on the sidelines of the Summit – might give an indication of what the latest position is. We have been in favour of entering into some kind of a swap arrangement. But that again is not really the G20 summit. That is simply updating you.
If I am not wrong, I think in Durban last year they sort of agreed on a swap adding up to 100 billion dollars, and then they have been working on what would be the different components etc. Maybe you will get an update. I do not have any role vis-Ã -vis the BRICS because I am not the Sherpa for the BRICS summit. So, that is the position really.
Now on the larger issue, I do think that currency volatility is going to be and should be a very important part of the summit-level discussions because newspapers all over the world have been focusing on the fact that the anticipated sort of withdrawal of Quantitative Easing 3 will lead to a change in flows, and already markets have anticipated that and money flows to the US have gone up and money has moved out from other markets into the United States and that has led to a lot of currency volatility, we have also been affected by that.
Obviously countries have to have their own monetary policy guided by whatever their national and domestic objectives are. That is what we do, that is what the European Central Bank does. But the purpose of the G20 is that different policies which are ultimately guided invariably by national interest should be so calibrated to keep in mind the impact on other countries because actually that is also in the national interest. It is not in anybody’s interest to do something assuming that the domestic positive effects are good and, if there are negative global effects that they would not impact on them.
So, certainly my view, I have no idea exactly how the discussions go, is that the G20 mutual assessment process which was designed to be able to talk to each other and to get a sense of what are you going to do, what am I going to do, what is going to be the combined effect, etc., I think this should include consideration of deployment of monetary policy instruments for the reserve currency countries. In principle the same thing would be true in all other countries also. But the spill-over effects of a non-reserve currency monetary policy are very small. And certainly we will raise this issue. I have no idea how people will react to it. But that is an important part of the plurilateral effort to coordinate policy amongst these major countries.
Question: Dr. Ahluwalia, the G4 leaders also will be there. Are you expecting a possible meeting of the G4 on the sidelines of the G20?
Deputy Chairman, Planning Commission: Who is G4?
Question: The Group of Four countries aspiring for Security Council membership – Germany, Japan, Brazil and India.
Deputy Chairman, Planning Commission: That G4? Okay. Is that a conventional terminology now?
Official Spokesperson: Yes, …(Inaudible)… politically.
Question: Is there likely to be a meeting of the G4 leaders and does the possibility of the expansion of the Security Council ever figure in the G20 meetings? And is it likely to be taken up at this meeting?
Deputy Chairman, Planning Commission: That is a good point. It tells you, since I did not even recognise the phrase G4, this is not my area. This is the principal forum for international economic interaction. So, the whole UN structure that you can call economic, which is the Bretton Woods institutions WTO, others, etc., they are included. To my knowledge, in the past we have not focused on Security Council reform or even broadly UN reform. That is a very important area. But I do not think it has ever been covered in the G20. Therefore, I assume that it would not be on the formal agenda.
Question: Dr. Ahluwalia, Azim Premji ne chitthi likhi pichhle hafte Prime Minister ko aur yeh kaha ki Immigration Bill hai USA mein voh bahut badi samasya hai yahan ki industry ke liye, khas kar IT industry ke liye. Theek usi tarah se UK visa ke liye joh fees dhai lakh dena padega sab ko. Jab protectionism ki baat karte hain, G20 summit mein har saal is baat par discussion hota hai. Kya yeh donom issues is baar Bharat Sarkar ki taraf se uthaye jayenge?
Deputy Chairman, Planning Commission: Dekhiye, ek toh yeh bilateral issue hai India aur US ka. Main pakka keh sakta hun ki jab India-US discussions hoti hain toh yeh issue zarur uthaya jayega. Lekin yeh G20 ke liye issue nahin hai. G20 ke liye yeh issue ho sakta tha agar immigration ke baare mein koi international agreement hoti. Lekin voh international agreement hai nahin. Joh WTO agreements on goods hain, us mein immigration is not covered. So, it is not an international issue. You can do whatever you want on immigration without violating any international agreement. That does not mean you should do it. And we certainly argue with them bilaterally.
Yeh mudda aapne uthaya bahut important hai kyon ki hamaara case yeh nahin hai ki yeh joh restrictions – abhi tak unhon ne lagu nahin kiye hain lekin unki legislative process in mein chal raha hai – ki yeh Hindustan ko hurt karengi. Hamaari view yeh hai ki US industry ki bhi competitiveness ko affect karengi. Lekin yeh bilateral issue hai. Maybe it will come up in September when the PM goes there.
Question: Dr. Ahluwalia, I just would want you to elaborate a bit on the currency swap as a concept. It is very sketchy right now I agree but at least at the conceptual level we should have some clarity. You have a 100 billion dollars tied up in Durban. What does it mean? Maybe Ms Titus can answer that. Also, the larger question is, does it in any way resemble the old rupee trade or anything that we used to have with Russia?
Deputy Chairman, Planning Commission: Good point! Since this particular arrangement is not yet in place, I will give you a reaction based on what currency swaps normally are, and I am sure that whenever we get the details it will be something similar.
Point No.1 is this is not rupee trade, this is not bilateral settlement of trade in any way in local rupees. This is a straight forward, if you like, cooperation in providing liquidity. And most currency swaps operate in the following manner. That is what Chiang Mai does. Basically different countries agree to make a certain amount of money available. Okay? When they make a certain amount of money available, then each country can draw on that pool. And if a country needs to draw, then the other countries in effect make the money available in the proportion that they have committed to the pool.
So, it is not as if you take the money and put it into another organisation. It is there on call and you make the money available. And usually there are some rules. Those rules usually are that let us say hypothetically if you enter into a swap where you are contributing 10 billion or 20 billion or something like that. So, if you are contributing 10 billion dollars, then what it usually means is a certain amount you can draw just for the asking. If you want three, four billion dollars or something like that, everybody else has to dish it out and you repay it at a certain time.
Question: It is akin to the Special Drawing Rights in someway.
Deputy Chairman, Planning Commission: That depends on how you denominate the swap. This is nothing to the IMF. This is a cooperative arrangement between three or four central banks. If there are four central banks and one of them decides to draw the money, the other three fellows will dip into their reserves and give them the money like a kind of loan.
I want to add one more thing and that is that I think in Chang Mai when you go beyond a certain level, countries concerned actually say, look if you want more money then it has to be linked to an IMF arrangement. That is interesting because if you are forced to go to the IMF, then it is not a completely free swap. But on the other hand the argument is that you will be going to the IMF for less than you otherwise would. And that strengthens your bargaining power with that institution.
None of these things is relevant for us at present in my view because I do not think our reserves position is such that we would need. However, it has become a bit of a fashion globally now to have currency swaps. If you read some of the documents that the IMF produces, the latest assessments are that there are three levels of safety nets. Level No.1 of safety nets is your own reserves; level No.2 of safety nets is some kind of regional currency arrangement, which is a little more informal and depends on whatever your own relationship is. Level No.3 is going to be IMF which is much more formal and usually involves conditionality. So, that is the position. I have no idea what is going to happen. My information is that 100 billion is agreed; we now have to operationalise it. This is not a G20 issue, this is a BRICS issue.
Question: Sir. Prime Minister yesterday during his clarification in Rajya Sabha said that he has certain influence over the Finance Ministers and Heads of State in G20. So, it will be interesting to know what issues are you going to raise in G20 meeting. Are you going to suggest any mode by which India can regain its old status in economy? Are you going to take any help from IMF at this point of time?
Deputy Chairman, Planning Commission: You mean take the help of the IMF to make suggestions to the G20 or you are saying go to the IMF?
Question: …(Inaudible)…
Deputy Chairman, Planning Commission: I have already said, I am not aware of any plan to approach the IMF. I do not think our current economic situation requires it. My view on these matters is that if your situation requires it, we are members of the IMF, we should go. But we do not need to go. And I do not anticipate that in the near future at all.
Now the question you asked is, what is PM going to say. I do not want to anticipate that because after all if you are going with him on the flight you can always ask him. He will be better informed by then. But broadly I would expect that as always he would be a very important, to my mind, knowledgeable voice reflecting not just India’s concerns but actually the concerns of the major emerging markets and also the developing world as a whole. That is a very big agenda. The agenda includes the global economy, it includes development issues, it includes financial sector reform post the financial crisis, it includes international financial architecture reform, the World Bank, IMF reform and those kinds of things, it includes trade and it includes energy and a whole slew of other issues.
So, I think on all of these issues he will be talking his colleagues. We will be briefing him on what are the other countries saying. So, basically it will be India’s view on these issues that he will be putting forward and we would hope that he will be able to persuade his colleagues to a similar point of view and the extent to which he is able to do that will be reflected in whatever the declaration is that comes out.
Question: There is going to be an important meeting of BRICS leaders on the sidelines of the G20 summit. What broadly is going to be the agenda? It has been five months since the Durban Summit. What is the progress on Development Bank for example? Also, is the BRICS grouping going to work as a grouping within the G20 process to advance common position and interest?
Deputy Chairman, Planning Commission: As I have already clarified, I am not the Sherpa for the BRICS meeting and so I am not informed. But on both these issues – BRICS bank and so on – I think the actual hard work on that is done in the BRICS Finance Ministers meeting, and when they are ready the summit more or less endorses. You remember, this is not a BRICS Summit, this is a BRICS meeting on the sideline of the G20. So, generally I would have thought major announcements of a BRICS new initiative would come in the BRICS summit. The next summit is going to be in Brazil. That is when all the BRICS preparatory work takes place.
They have in the past traditionally met on the sidelines of the G20 partly to simply coordinate their views or hear each other – you know that is one of the things that make a lot of sense – and sometimes they have used the occasion to update people on ongoing BRICS activity. The two ongoing items are the currency arrangement and also the BRICS Bank. But whether they will be in a position to make an announcement on those, I honestly do not know. I doubt if you will get any announcements on the BRICS Bank because I do not think that work is done. They will be reviewing progress in these areas.
Question: Mr. Ahluwalia, you talked initially about the Saint Petersburg Action Plan. I just want to know a broad outline of the component of the Action Plan which is likely to emerge of cooperation among the G20.
Deputy Chairman, Planning Commission: To some extent when we get there that is when it is drafted. Normally what has happened is the Action Plan sort of reflects what is the agreed position of leaders, but it puts it down with a little bit more detail and it builds into it what the G20 Finance Ministers have also agreed. So, this will be one of the things that we will be looking at in terms of drafting sessions. Therefore, it is not yet a final product any way. I think broadly it will cover the issues I have talked about.
But most importantly, it will signal what do the leaders say on these issues or in a way is it possible at this point to say that would be what it would be unless you resort to astrology or something. To be fair, there are lots of drafts that float around typically at any given time. There are drafts, then hundreds of comments from different countries and there is not a document which is an agreed document there.
Question: Sir, yesterday the Prime Minister in both the Houses of Parliament raised the issue about subsidies, as you see, the monetary policy is having an effect on the dollar vis-Ã -vis the oil subsidy. Do you believe that this is something that does not really benefit the poor, and does this mean that we should be ready for cutting the oil subsidy bill because it is now going to nearly Rs.1,80,000 crore?
Deputy Chairman, Planning Commission: I think we have moved away from the G20 to a domestic matter. Let me put it this way. Let us finish with the G20.
Incidentally the issue of energy subsidies is one of the issues that come up in the G20. The G20 on many summits have said that we must cut down fossil fuel subsidy except those that are targeted to the poor. The Indian policy documents, the Eleventh Plan, the Twelfth Plan, the integrated energy, all of them say the same thing. We do not have any real difference with the rest of the world on the merits of this broad approach. I do not think they are asking us to make any commitments or anything.
The only commitments that are being made in the G20 are, are we going to maintain a reasonable fiscal deficit or not. And I think we have indicated to them – the Finance Minister has indicated this, the Prime Minister has indicated this – that the fiscal deficit is going to be at 4.8 per cent of the GDP. Now on energy subsidies more generally, our policy has been to phase out energy subsidies except those that are targeted. And I think that is correct policy. So, I hope that that will actually be implemented over time.
Question: Sir, could you run us through the key issues in terms of trade and tariff barriers, etc? Also, on Syria, it is bound to come up at the G20. If it does come up, what is going to be our position? Or will we make a statement on that?
Deputy Chairman, Planning Commission: As you can imagine, since this is a very recent development, and no earlier meeting has actually discussed Syria, and besides it is not part of the normal economic agenda, it is obviously a very important issue. So, I cannot judge what would be the position in that regard and to what extent the leaders would want to take note of it at all. So, on Syria I have really no comment to make at all at this point.
Question: …(Inaudible)…
Deputy Chairman, Planning Commission: As regards trade, I am sorry I zeroed in one obviously what is the most, what everyone is speculating on.
On trade I will tell you what our position has been. First of all, and I think most countries agree with this, multilateral trade liberalisation is an extremely important part of any sensible global policy for stimulating growth and production and efficiency and so on. We have been engaged in the Doha Round. It used to be called the Doha Development Round and we have been engaged in it for a long time, not been able to make progress. Most countries would want to assert that we should bring the Doha Development Round to a successful conclusion. Certainly that would be our position and I would hope that the Summit also endorses that. More practically, there is going to be a Ministerial meeting in Bali on the 9th of November and that has certain items on it. There are several but trade facilitation is one of them, something on agriculture which responds to the developing countries’ concerns is another, global value chains was the third. And I think that most people would like to see a successful outcome in Bali.
As far as we are concerned, that is also our view but we do not view Bali as a separate thing. Really it should be a stepping stone to achieving a successful outcome of the Doha Round. I think India and many other developing countries are concerned that the central focus on making progress in the Doha Round should not be lost sight of.
Meanwhile, in the past we have voluntarily, all of us, undertaken some kind of a pledge not to resort to protectionist measures. The truth is that the WTO gives us a report as to what extent has this been maintained. They look at every single measure that a country has taken including liberalisation measures and then they try to look at the net effect. I think their assessment has been that in past several occasions it is not the case that no protectionist measure has been taken. The measures that have been taken are all small and many of them are offset by measures to liberalise. The general assessment is that this declaration has certainly contained what many would have feared to be an excessive resort to protectionism. Although if you view it on the sort of whitest of white kind of criteria, almost every country has undertaken some measures which can be called a little bit protectionist.
I think this issue will come up again and I know that many countries want that since we have not concluded the Doha Round, the last promise we made was that we undertake not to have any protectionist measures until the end of December 2014, which is next year. Most people feel that there is not enough time to conclude the Doha Round between now and then. So, there is a move that perhaps the leaders should give a commitment to extend this pledge. There are different views on this. So, one of the interesting things that would come out of the Summit is what happens to this move. Do the leaders agree to extend the pledge or not? I think that is a substantive issue.
Question: Russia offered to organise a G20 agenda based on three priority issues in eight areas. Which amongst them India feels is special for itself?
Deputy Chairman, Planning Commission: I think most countries, certainly India, generally have agreed with the broad priorities that the Russian Presidency has brought to the Saint Petersburg Summit. None of those areas are areas that we do not think are important. I do not want to say now which one is important and which one is less important, I think they are all important. I would hope that we will see progress in each of them.
Question: Aap ne currency ke baare mein kayi saare baaten ki aur bataya aap ne G20 ke baare mein bhi. Mera ek chhota sa saval yeh hai ki joh Rupaye ki haalaat hain, joh haalat hui hai Rupaye ki, aitihaasik hai. Aap desh ke aur vishva ke jaane maane arth shastri hain, policy maker hain, desh ko bahut kareeb se jaana samjha hai. Ek nationalist bhi hain aap. Is ke naate mera saval yeh hai, joh Dollar hus raha hai, Pound thahaka laga raha hai, toh hamaara Rupaya muskurayega kab? Yeh pichhle chaar mahinon se joh us ka haalat hai, uska muskurahat kab vapas lautegi? Yeh aap se ek arz hai. Kuchh prakash dalenge toh kripa hogi.Deputy Chairman, Planning Commission: So, are we closing the G20 discussion?
Official Spokesperson: I think there is one more question. We will come back to this.
Deputy Chairman, Planning Commission: Yes, madam. There has been no gender balance in this press conference so far, so why do not you ask your question.
Question: On taxation I understand that Mr. Chidambaram after meeting Finance Ministers had said that it should be ‘enriched’ to take into account the concerns of developing countries. This is on transfer pricing and legal taxation. Is there going to be anything further from India’s point of view in terms of a suggestion on what needs to be done because this has been a big issue of late here?
Deputy Chairman, Planning Commission: That is a very important point actually. The OECD and the G20 together had initiated some work in what they call base erosion and profit shifting. It is a phenomenon of the modern world that you have highly global enterprises operating in multiple countries. So, when they are operating in multiple countries, if they are all subsidiaries of the same company, when they are buying a product from one country for the main parent company, the issue is, is the profit that is being generated from the activity in the first country actually being made available to tax, or is it all being shifted to the other country through basically transfer pricing?
I think this is a very important area and most countries worry about this. I think developing countries worry about it especially because there is a perception, and quite logical, that with globalisation, multinational companies based in the industrialised world, it makes sense for them to shift a lot of their production to developing countries which are more competitive. We actually welcome this and other developing countries do. So, we want them to locate their units in India. But you also want to be able to make sure that there is a reasonable profit taxation. So, the OECD has done some work and they will be making a presentation to the Summit on the conclusions of their work on base erosion and profit shifting.
There is also the issue of tax information transparency. That is, countries get a lot of information about people and transactions. Are they willing to share that? Our position on this has always been that we want tax jurisdictions should cooperate with each other in a symmetric way in the sense that we are willing to give them what they think is legitimate information and they should give us what we think is legitimate information just for processing the determination of tax liability. So, what is going to happen is that these initiatives are there. The OECD will put them forward and the leaders will consider that and sort of give their views, indicate the extent to which they support.
We are fully involved in this. I do not know what Mr. Chidambaram said to you but the Ministry of Finance is actually involved in the process by which these reports are being prepared. I think at various stages Mr. Chidambaram has said that, look being involved is not enough, you have also got to take account of our concerns that it should be a two-way process. And I think it is reasonably a two-way process.
I have to read what they are going to present. It is not as if the Summit is going to sort of put a seal of approval on specifics. This is more broad kind of framework. What it does is, if there is a set of principles that are agreed, then each country can devise its own taxation rules to take advantage of those principles. And when people complain about it, each country can say, look we are only doing what best practice is as defined by this OECD-G20 effort.
Question: My question is on Syria again. If the situation in Syria explodes, do not you think it will have serious consequences for economies like India and other developing countries? And do not you think you should raise this issue with your G20 partners and advise them not to take certain military steps which will destabilise West Asia?Deputy Chairman, Planning Commission: You are asking two hypothetical questions. One is a hypothetical question about something that may happen; and then there is the hypothetical question of since it is not on the agenda, in what manner it will be put on the agenda. Obviously, I cannot, I am hoping that we will not have any disruptive event. Obviously it is politically a very important issue, and for me to comment on it is sort of saying if it happens this is what we will do, would not be proper. I have no basis.
Question: …(Inaudible)…
Deputy Chairman, Planning Commission: Prime Minister is free, but it is not appropriate for me to comment. So, I am not going to go beyond what the Prime Minister said.
Official Spokesperson: We will now go back to the question about the Rupee.
Deputy Chairman, Planning Commission: Okay, the question about the Rupee. Now that the G20 has been taken care of, we get back to more exciting things.
I do not have very much to add to what has already been said by the Finance Minister and the Prime Minister. We have had a lot of volatility in the currency in India. The Rupee has depreciated quite a bit. Very often in the Indian press the impression given is that the whole world is stable but the Rupee has depreciated. This is not the case. The truth of the matter is, there is a lot of currency volatility and there has been depreciation in the Brazilian Rial, in the Indonesian Rupiah, in the South African Rand and all kinds of currencies. It is true that the Rupee has actually depreciated more than the others.
I think we have explained that because India had a somewhat high current account deficit, and this is not something that we were by the way ignoring. If you look at the Twelfth Plan which has been available on our website for quite sometime and even the hard copies are now available, we said quite categorically that in the first year of the Twelfth Plan, the current account deficit was too high, something like four per cent or so, and it should be brought down gradually. So, we knew it was a problem. Now, it turned out that in the first year – we were writing when only half the year’s information was available – it was worst than the fourth in the sense that it ended up being 4.7 per cent of GDP not just about 4. A very important reason for that was a huge increase in gold imports which reflects all kinds of other factors I do not want to go into. But the Government has quite categorically recognized that we cannot be continuing with such a large current account deficit. I think Finance Minister in Parliament the other day sort of said that, look last year i.e. 2012-13 we had a current account deficit of $88 billion, we are planning to bring it down to $70 billion.
So, the first point that I want to make is that it is true that the current account deficit was high. What triggered the problem was, although it was high last year at $88 billion, we actually were able to finance it with $90 billion of inflow. So, reserves actually went up slightly. So, it did not look as if it is a big problem although we knew that it had to be brought down. Now the change is that when the Chairman of the Federal Reserve made this statement about withdrawing or reversing the QE3, that obviously shook markets around the world and affected India also, and money that was earlier coming in quite freely started stopping and to some extent even going back. Now, that obviously creates a serious financial problem and we have to address that problem. And that problem we are addressing by making sure that current account deficit for the year as a whole is actually going to be significantly lower.
I want to emphasis to you one thing and that is that you will not see that in the first quarter result for 2013-14 for the Balance of Payments. The reason for that is that it is in April-May that you had a big increase in gold imports. Since then gold imports have come down quite sharply. So, the Finance Minister’s prediction was that the current account deficit in the current year, 2013-14, will be approximately 3.7 per cent of GDP. It will be much higher than that in the first quarter. I do not know what it will be but I do not want you, when it comes out probably at the end of September, to say: you said 3.7, look it is much higher than the first quarter.
I am telling you now – it is not an official statement, it is my expectation – you will not see an improvement in the current account deficit until the second quarter results are available. Okay? But the Finance Minister is aware of all this. So when he said 3.7, he is talking about the year as a whole. I think that is possible. I think that is possible because gold imports will be sharply curtailed. We have, in fact, already because of the depreciation and the impact on imports, there is an improvement that is evident in the trade account. So, I expect that we will actually be able reduce the current account deficit.
When you are trying to reduce the current account deficit in any country, you do a Economics 101 Exam and you say there is a country called whatever it is and it has big current account deficit, what should it do? Well most people will say it should contain aggregate demand and it should allow the exchange rate to change. So, the first point is we have in fact seen quite a substantial change in the exchange rate. And that change is consistent with trying to reduce the current account deficit. So, a lot of people who keep saying, no, no, no, why do you let the Rupee depreciate, I mean the honest truth is that depreciation hurts some people but it helps a lot of other people. And this is a very important point.
I know that a lot of people think depreciation as some question of national pride. But actually if you want to have sensible macroeconomic management and you want to bring down the current account deficit, basically you have to allow the exchange rate to change. And what it is doing is, its putting our exporters in a very strong position because exporters now have a much more favourable position just about at a point when we think the global economy may be turning around. So that is good. Also the depreciation is going to make imports more expensive. And all the Indian producers who for a long time have been complaining that it is very difficult to compete against imports, imports are flooding in, imports are cheap, they will find it a lot easier to compete against imports because imports have become more expensive.
As far as aggregate demand is concerned, the Finance Minister has categorically said that he is going to maintain the fiscal deficit target, 4.8 per cent GDP. We have in fact communicated that target to the global community. I think the G20 know about it also. So, I think what the Finance Minister has said is that that is a red line. So, I think it is true that the exchange rate has depreciated; it is not true that it has only happened in India. You could say that part of it is due to the high current account deficit but actually it is due to the high current account deficit combined with a change in the financing capability. And we have reacted to that by, planning to reduce the deficit, and at the same time doing a lot of things that will stimulate inflows. Just in case any of you interview me after the first quarter numbers come out, please remember that you will not see that improvement in the April-June current account deficit.
Question: Should we expect the control in situation, whatever you are telling us, by April 2014? Main ye keh raha tha, yeh joh sthiti hai, yeh niyantrit hogi April 2014 ke pehle ya fir aage jaayega ye sthiti?
Deputy Chairman, Planning Commission: Dekhiye is mein prediction koi nahi kar sakta. Kyunki it depends ki world conditions kya hain, oil prices kya hain. Main khali yeh keh raha hoon ki aaj ki sthiti agar aap dekhein toh meri opinion ye hai ki kuchh to depreciation ho gayi hai, Rupee thoda mujhe lagta hai ki over depreciate kar gaya hai. Voh bhi normal hai kyunki hum log yahan fix nahi kar rahe hain ki yeh, idea yeh hai ki market ko thoda flexibility deni chahiye. Aur agar thoda over ho gaya toh voh kam bhi ho jaayega. So that is the way to handle or look at it.
Question: Sir, there seems to be a sort of veiled suggestion from your Government. that the responsibility for this current crisis lies with the economic policies of Pranab Mukherjee. Now this has also made the papers today. Very straight, Sir, does the UPA Government believe that Pranab Mukherjee’s economic policies over three years when he was Finance Minister are responsible for the state of the economy today?
Deputy Chairman, Planning Commission: We may be reading different papers, but I do not recall the particular news item and I do not respond to newspaper stories either. Look, I think to attribute anything to any one factor is not I think correct. I do not believe that any one has said that. Possibly people are interpreting different things in different ways. After all our view is that the present problem is in large part due to a change in global financing conditions. And that certainly cannot be attributed to whatever happened last year. Global financing conditions changed dramatically only earlier this year. Please remember that in the year 2012-13, of which the first half was under the previous Finance Minister, in that period the inflows that came in to finance current account deficit were $90 billion. So, I am not aware that that is a Government position. But if you are putting in different people’s mouth, you should ask them.
Question: Sir mera sawal ye hai ki is vaqt desh mein dollar ki zarurat hai. Zyada se zyada nivesh aaye, is baat par gaur karna chahiye jis se arth vyavastha durust ho. Lekin Bharat me business start karne ke liye joh World Bank ki report kehti hai Bharat 173rd position par hai. Toh yahan par kya durust kiya jaaye jis se arth vyavastha patri par aaye aur zyada se zyada nivesh is desh mein aa sake?
Deputy Chairman, Planning Commission: Dekhiye, joh World Bank ki report ki aap ne zikr ki, Ease of Doing Business Report, first of all yeh 2009 ki report hai – 2009 ki report based on data of 2008 aur 2007. Toh yeh joh aap keh rahe hain ye sahi hai, lekin ye tab bhi sahi tha jab economy 8-9 per cent badh rahi thi. Ab economy kam grow kar rahi hai, humein dekhna chahiye kyon. Lekin ye point joh aap raise kar rahe hain ye correct hai. India me ease of doing business itni achchi nahi hai jitni honi chahiye, aur is ko humein correct karna chahiye. Ye to humne apne Twelfth Plan me bhi kaha hua hai. Actually aur isi report ko quote kiya hua hai wahan. Aur agar humein isko sudharna hai toh doh cheezein karni padegi. Ek to ye jo ease of doing business ki index hai ye kuchh 9-10 indicators se bani hui hai. Us mein aadhe to Central Government ke hain aur aadhe State Government ke hain. Jo State Government ke areas hain us mein Central Government kuchh nahin kar sakti. Lekin joh Central Government ke areas hain, vahan pe humein zaroor karna chaihiye. We should do that, and there is no doubt in my view that we should do that.
Official Spokesperson: Thank you very much. With that we come to the end of this media interaction.
(Concluded)
For video of this media interaction, please visit:
Media Briefing By Deputy Chairman, Planning Commission on G-20 (31.08.2013)
