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GST Can Ruin Lives If Mistakes Continue, Says Yashwant Sinha

Yashwant Sinha speaks on varied topics from Narendra Modi to GST in this interview.



BJP veteran Yashwant Sinha at the release of Congress leader & former union minister Manish Tewari’s book “Tidings of Troubled Times”. (Source: PTI)
BJP veteran Yashwant Sinha at the release of Congress leader & former union minister Manish Tewari’s book “Tidings of Troubled Times”. (Source: PTI)

There are concerns regarding the design and execution of Goods and Services Tax, and it can ruin lives if errors continued, former Finance Minister and senior BJP leader Yashwant Sinha told Sanjay Pugalia, editorial director, Quintillion Media in an interview.

Sinha spoke on varied topics, including Prime Minister Narendra Modi’s rebuttal of his questions on the current economic conditions, GST and more.

Here are the edited excerpts from the interview:

We’ll talk about the specifics later, but do you believe the prime minister offered an effective rebuttal to the points you have raised?

No, the prime minister selectively presented only those statistics before the country which could aid his own arguments. He maintained silence on the other issues that I raised in my article. And if I may give some context, before speaking himself he attempted to get my son Jayant Sinha to write an article to counter me, and for a day the media was talking about how there is a rift between father and son, what has the public got to do with it, but that didn’t work.

Then, the finance minister (Arun Jaitley) made some personal comments, and it was made to look like a fight between the two of us, but that also didn’t work. It was then that the prime minister came up and made his speech. I also listened to his speech carefully, and later on read it too.

And, I’d like to tell you that the Reserve Bank of India report came the same day. And if you consider what the prime minister said and what the RBI report held, you will see they are polar opposites.

Because not everyone knows every detail of which data he used selectively, as you put it, here are three hard facts. The PMI data for September, core sector data, data for trucks and tractors... that have seen strong growth. So, the prime minister has a story to tell—that may be one quarter was bad, a blip or aberration, but we are doing very well. Much better than what the critics are saying.

I want to clarify this at the outset. Neither I or anyone else who has said anything on the matter I spoke on just one quarter’s statistics. I wrote clearly in my write-up that the government is correct in saying that this is not single-handedly due to demonetisation and GST, because data coming in from the previous quarters was indicative of a slowdown.

So, this slowdown belonged to the last 5-6 quarters. When we reached the April-June quarter, we reached 5.7 percent, the lowest in the last three years. So, you had already been slowing down for the last one-and-a-half years and then you reached the lowest point. Anecdotal evidence from on-ground realities proved that the situation wasn’t good. A person like me will not judge a trend based on data from one quarter.

You spoke of the data that the prime minister brought up, how he quoted data show that sales of trucks, commercial vehicles, tractors have increased. We will first have to consider data over a period of time period. On the one hand, you say dealers were de-stocking and on the other that sales were higher—both of these things cannot occur together.

His words were—in our times the GDP has grown well, the fiscal deficit is contained, current account deficit looks good, and we have been able to curb inflation very effectively.

Let us think about this seriously. All of us know and I even mentioned in my article, that the government had an unexpected benefit in the depressed crude oil prices. I read somewhere today that when the UPA left office, the oil price was around $110/barrel. Today it is around $55/barrel. The government received such a big bonanza.

Now, if you were to look at the government’s first budget, it clocked a benefit of at least Rs 1.25 lakh crore as subsidies fell due to falling crude prices. Rs 1.25 lakh crore! So, in all that you said, fiscal deficit went down, current account deficit was reduced (although it recently increased), inflation was under control.

If there is one reason behind all of these, it is not the government’s economic management. It is the windfall that the government received without any effort, as the government has no control over global oil prices.

The prime minister usually chooses to ignore criticism or commentaries that comes his way. This is the first time I’m seeing that after specific commentary, he has reacted in such detail.

Along with that, he has chosen to highlight that if there’s a problem, I try listening and responding to it. ‘Look, the price of petrol and diesel has been cut down by Rs 2 each. Whatever needs to be fixed in GST, be it in procedural level, slab level or may be an overall reduction in rate, the government is responding to remove the problems.’

There are 2-3 ways to respond, and a time to do so. First, you see that something’s not right. So you fix it, correct the course. Second, when there’s a lot of pressure piling on you, you give into the pressure and correct the course in desperation. You spoke about the price of petrol and diesel.

So much noise was made in the country in relation to it. That everyday you’re increasing the rate of petrol and diesel via taxes. And when there was noise all around, then the government reduced the excise by Rs 2 per litre. In the same way, the noise that is still there surrounding the implementation of GST, the GST Council is being convened and an outcome may be arrived at soon. So the work is being done after coming under pressure.

I shall say one more thing to you. I have prepared a lot of budgets in which we usually make changes in taxation. There is always great deliberation on what will the impact of the change be. Will the prices rise or drop, how much money will the government get, what will be the impact on the common man’s life? Decisions are taken only after taking all this into consideration. Especially when you are about to implement such an important thing as the GST, in that case everything should have been thought of beforehand. Today, for instance, if they say threshold is not Rs 75 lakh but Rs 1 crore or Rs 2 crore.

Are you saying that the decision was taken in a half-baked, ad-hoc way without thinking through meticulously?

Absolutely. The amount of preparation that should’ve been made before implementing GST hadn’t been done. The number of possibilities that should’ve been anticipated beforehand, hadn’t been done. The anomalies are clear to the eye. For instance, if you go to buy new shoes and you’re told to pay 5 percent GST, and then when you want to sell it as second-hand that has 18 percent GST. Isn’t that an anomaly?

The second important thing that I want to mention is, if you remember in 2002 I had implemented central value added tax. Had state VAT not been implemented, then today the GST wouldn’t have implemented. So the entire preparatory work was done by us. CENVAT was brought into force by us. I had fixed three rates for excise duty while implementing CENVAT. One was a merit rate of 8 percent, a demerit rate of 24 percent, and the mean rate of 16 percent. This was something which we put into place before leaving.

Now if I was talking to any state’s finance minister, I would’ve said that it is logical that we do three rates. It would have been nice if there was one rate. If there couldn’t have been one rate, there could’ve been two rates. One central GST and one state GST. But making it five instead of three, and imposing cess on top of it and making exceptions to that...

In the first meeting of the GST Council itself after it got implemented on July 1, the duty on fertiliser was reduced. Why did they not think of this earlier? There are such intelligent people sitting there, didn’t they know what the importance of fertiliser for farmers is? So there were things like this which weren’t supposed to happen. Any person with clear thinking wouldn’t have let such anomalies creep in.

Another thing that I found surprising was that, while as I said the prime minister doesn’t usually respond to critics, these were topics on which the finance minister could have spoken. But the prime minister chose the occasion to respond in great detail. Is it his belief that since he is seen responding, reacting and taking corrective action, it will bring the narrative back into his control? That even if there’s a blip or criticism, there’s no damage to him from it?

Look, what everyone’s talking about is that there is an atmosphere of disappointment that has been created in the country. The prime minister has said that some people are spreading disappointment. But it was already there from the beginning. What’s there to spread?

He had said that some people get joy in spreading negativity, after which they get good sleep.

The disappointment is already there. The point about spreading further disappointment doesn’t arise. The second thing is that the prime minister has concerns about the coming elections.

Are you saying that the hyper mode is because of Gujarat?

I think it definitely is so. Because Gujarat is a very commercial state, a business state. So the news that is coming from Gujarat isn’t all that good. So, if things are being done keeping Gujarat elections is mind, then that’s fine. Whatever is for the good of the masses.

Well it’s politics, why take the risk, and leave a stone unturned. The Gujarat election isn’t a run-of-the-mill event. So he may think, ‘if I need to take 10 more correctives and admit to mistakes, then I’m fixing that.’ The Gujarat election isn’t a minor thing after all.

You may be doing the right thing. But let me tell you that to win elections you need to take the right step at the right time. If you take the right decision at the wrong time, that has no impact. A lot of election results tell us that last-minute relief does change people’s views.

Do you feel your core criticism got a response from the government—including joblessness? That GST and the note ban were two unnecessary jolts given to an economy that was doing fine.

I would say that pointing to the GDP growth number, saying it is just one quarter and a temporary blip, is inaccurate. Unemployment is a massive problem that we are presented with. The data that’s coming on that show that job opportunities are falling. A person like me who is still rooted to the ground reality can vouch for the fact that unemployment exists and is troubling the youth.

The prime minister and the government are emphasising that they are promoting the idea of empowering job creators, instead of job seekers. That through the Mudra Yojana, Rs 3.5 lakh crore has been distributed to nine crore people.

The employment scheme was earlier, probably during Rajiv Gandhi’s or Indira Gandhi’s time, called the Prime Minister’s Employment Program. After which, when we came to power, we called it Prime Minister’s Self-Employment Program. It followed the same principle of training youngsters, getting them a loan from banks and getting them to do business.

MUDRA is just another name for the same, there is nothing new in it The question is, when you say that all this money has been given out and people have become empowered and entrepreneurial, where is the evaluation of this programme? Has any quantitative study been done?

We all know that people take loans and use them for other purposes. It is difficult to say yet that a lot of people are already running enterprises and have hired other people with the money they got from MUDRA.

There is a recent World Bank report which the government sees as an endorsement of its work, that decline in growth was a blip, and that India is on the path of spectacular growth.

I have seen the World Bank report, what’s been reported in the papers. In that they have praised the GST, that it will be very beneficial in the future. There is no question in that. The biggest supporter of GST within the BJP is Yashwant Sinha.

In fact, the finance minister had acknowledged my contribution during the midnight ceremony of Parliament. I have no quarrel with the GST. My problem is with the design and execution of GST.

The World Bank said that GST will have an impact in the future, I accept that. But if we keep making mistakes, then even a good tax regime like GST will ruin lives.

A lot of people are questioning your motives. People have a seen an unexpected photograph in the papers which has you in a frame with a Congress leader and the Chief Minister of Delhi...

I am not up to anything. I want to clarify that when I wrote that article I had never expected that it will trigger a big reaction, that the prime minister would speak for over an hour. Now a discussion has begun and the government is now taking steps to make things okay.

If things become all right, it will only make me happy, that I started a conversation that led to this. As far as that photograph is concerned, it was decided much earlier that we would attend Manish Tewari’s book launch event.

In fact, today I saw a picture on social media which captures (PV) Narasimha Rao and (Atal Bihari) Vajpayee hugging. So what’s so unusual about a picture which has me with leaders from the Congress and the Aam Aadmi Party?

This is a basic norm of democracy.

That’s right. I am from a political school of thought which believes that political differences should not come in between your personal relations.

Is it possible that those of us who are directly connected with economic matters, urban people, traders, the middle class, taxpayers, and youth have concerns which are being voiced. The political narrative right now is ‘those of you in the chattering class continue to criticise, I am focussed solely on the poor, and am doing so much for them, that winning elections is game that you do not understand.’

Yes, but what you just said has been dismissed by the prime minister. He has said that winning elections is not my goal, but working for the country is. And I believe this should be the goal of the people in the highest posts, irrespective of whether they win the elections or not. During Atal Bihari Vajpayee’s government, we had lost the elections.

That’s like an ideal situation. It’s a fact that politicians are in the trade to win elections.

If someone is in politics only to win elections, I won’t agree with that.

The Prime Minister said “I don’t do freebie politics, I just work for the country. Power comes and goes.” You are not ready to believe this statement at face value?

The Prime Minister spoke of distributing freebies. He is doing nothing other than distributing freebies. If you analyse all the schemes the government is running, you will know how many freebies are distributed for free. This is just like Indira Gandhi, freebies are being distributed in the same manner.

Another data point that I meant to bring up earlier—the government has often taken credit for the record inflow of foreign direct investment. Then it says big government spending will take care of everything, even if private investment lags. And now, there’s improvement in bank credit offtake too.

People say they see green shoots in the economy. You never know when the green shoots wilt. During the UPA government, I would respond to them in Parliament that they always had some green shoots to show during September which used to wilt during December and never recover.

So, believing in the occasional green shoots is not right. Second, government spending without private spending will not enable economic prosperity at all. We all know this government has front-loaded the expenditure. The fiscal deficit for the full year has already nearly been reached. What about the remaining six months?

There’s the risk of slippage in the fiscal deficit.

If you go past the fiscal deficit target, the consequences of that are not healthy for the economy.

It’s interesting how the political class has started making new references to the Mahabharata. Without taking names, the Prime Minister spoke of ‘Shalya Vrutti’. Your comments on that since it was a very pointed remark.

I read the Mahabharata in youth with much interest, I know about each character in it very well. Which is why I recently spoke about how Shalya accidentally went to fight for the Kauravas. Then there’s a Bhishma Pitamaha whose only mistake was that he remained quiet during Draupadi’s ‘Chirharan’.

Then we know of Duryodhan and Dushyasan. If we have to decide who resembles who in the Mahabharata, a movie has to be made.

I hope this healthy debate continues and you keep commenting.

I am always in favour of a healthy debate. Which is why I never got distracted from the real issues and got personal, with charges flying back and forth. I will always be focused on issues.

You made a reference to the folklore that is popular in Bihar of Veer Kunwar Singh, on how he began his battle at the age of 80. Is it to be understood that you will, as Veer Yashwant Sinha, be returning to active politics?

Since my age of 80 was mentioned in a gathering, I would like to say that at 80 I am still giving speeches. I have never read a budget speech seated. So, age is just a number. Babu Kunwar Singh picked up arms at the age of 80 to fight the British. I am 80 years young.

So will we see you in the Rajya Sabha?

No, I do not wish to enter any house now. I retired from electoral politics in 2014.

The Rajya Sabha isn’t electoral politics.

Still, it’s as good as that. I have no aspiration to go to Parliament.

You can watch the full interview here.