Finance Secretary T V Somanathan — the top bureaucrat in the Union finance ministry – who also holds the expenditure portfolio, says he is certain about India’s growth story, and feels that the domestic economy will be the key growth driver in FY24 as global demands could shrink due to headwinds such as high inflation in major economies and supply chain disruptions due to the ongoing Ukraine war. He also tells Rajeev Jayaswal in an interview that the Adani crisis will not have wider ramifications for the Indian economy.
Edited Excerpts:
Major global economies are slowing down. Global demand is shrinking, exports are hit. In this situation, what is your assessment of the Indian economy? How will it perform in FY24? I think the Indian economy is doing well. It remains one of the fastest-growing economies. The global situation is a little difficult, because there is likely to be a reduction in growth next year — in the Western countries, particularly. So, we will not get much of support from other economies. We’ll have to stand on our own feet. That is why such a big increase in capital expenditure has been proposed.
The Budget Estimate (BE) for MGNREGA in 2022-23 was ₹73,000 crore. It has been reduced to ₹60,000 crore in the 2023-24 BE. Why? We have two reasons for this. One, we have made major increase in the Budget provision for PM Aawas Yojana (Rural). In fact, the increase is more than 100%. Similarly, we have made a major increase in the Budget provision for the Jal Jeevan Mission. Both these schemes are of rural works. These are works carried out in rural areas using same kind of semi-skilled or unskilled labour, which is used in MGNREGA. So, our view is that the additional ₹40,000 crores going on these two schemes will create considerable job opportunities in rural areas. Therefore, the demand for MGNREGA is expected to moderate to that extent. The second reason is, the economy has normalised. We are going back to almost the 2019-20 situation. This will also lead to moderation of demand, and MGNREGA is a demand-based scheme. So, we feel that the demand is likely to be less than the last year. That’s why the provision has been reduced. However, if actual demand goes up it will be met through supplementary demands for grants.
Whether India’s financial institutions and financial markets are safe and sound amid this Adani controversy? Let me answer it in three parts. First, as far as the public financial institutions — the banks and insurance companies — are concerned, they are absolutely safe. I will repeat that whatever has happened is utterly insignificant, too small in its effect on the public financial institutions. There’s absolutely no danger to depositors, policyholders, investors in these institutions. That’s first one.
As regards financial markets. Yes, whenever a particular event happens, it affects prices in the markets. This is a normal feature of any active capital market globally. I will give you an example. It has [however] no connection with the particular case that you’re mentioning, I’m not comparing the two at all… Recently, there was a company in the US called FTX, which just collapsed, that has not affected the working of the American financial markets. See, a company going through fluctuations – up, down, sideways — is normal in financial markets.
We have very sound financial market infrastructure. We have good regulators. The regulators will be able to regulate the markets… One individual company may go up or down. The market itself is not affected. It’s a very sound market. It’s a very safe, safe trading place. I’m not saying whether shares are safe or not. [Because a] share is not like a fixed deposit. It is not a small savings instrument. A certain amount of market fluctuation is inherent in the share market… the marketplace is sound.
What about private sector banks? I don’t think there is any problem with private sector banks, either. I think, [as] you are asking me, I know more about public sector banks. I don’t know, if you ask me, what is the exposure of a particular private bank, I wouldn’t know. Only the Reserve Bank of India (RBI) would know. But they have clarified that there is no issue with them (private banks) either. I do know about the public institutions; public sector institutions’ exposure is insignificant.