Senior Congress leader, General Secretary of the All India Congress Committee and Rajya Sabha MP, Digvijaya Singh is popular for his free and honest views. The Dollar Business spoke to him on demonetisation, Donald Trump, India’s manufacturing and foreign trade, the nation’s perception in the global trading community and a host of other issues. And as expected, he did not mince words.

Steven Philip Warner, President (VMPL) & Editor-in-Chief | December 2016 Issue | The Dollar Business

TDB: What is your take on schemes like Make in India, Skill India, Pradhan Mantri Jan Dhan Yojna, etc., introduced by the incumbent government?

Digvijaya Singh (DS): There is nothing new about these schemes. These are all essentially a continuation of the flagship UPA schemes. They have just been packaged differently this time. Even the UPA government had a manufacturing policy. The UPA’s manufacturing policy was very comprehensive, macro in nature and was a well thought out one whose basic objective was to increase the contribution of manufacturing in the GDP and I believe the same has now been redrafted by the current Modi-led regime.

I feel the need of the hour is to frame policies that will inspire the trust and confidence among investors. For new entrants, procedures for setting up plants should be simplified, i.e. the ease of doing business needs to be strengthened. Global trends in manufacturing should be kept in mind while encouraging both greenfield and existing projects. To remain competitive globally, we need to be always working towards keeping our firms in sync with the ever-evolving global business trends and dynamics. Also, we as a country should strategise through intelligent fiscal policies to ensure a situation whereby there is maximum domestic demand for our manufactured products.

TDB: Talking of being competitive globally, despite reduced exports to the world, China continues to remain a challenge for India, don’t you think?

DS: Yes. It is a fact that we cannot subsidise our manufacturing sector to the extent China does. And nor is it a good policy. China’s subsidies have resulted in their manufacturers underselling their products below their cost of production in many cases. We as a nation cannot afford that. Instead, we through an intelligent fiscal policy can generate various tools to incentivise and protect our manufacturers and exporters. A case in point is the way the UPA government implemented MIP (Minimum Import Price) in the steel sector to safeguard our domestic manufacturers. Such measures can turnaround trade equations in many cases. In order to see ‘Make in India’ take off in the real sense, we need to use more of such intelligent fiscal policies and safeguards so that manufacturers and investors across the country have enough confidence in our economy. We also need to have a consistent taxation policy, with no room for something that we did in the case of Vodafone. The current government had said they will withdraw the retrospective tax, but that has not happened so far.

TDB: So how do you view India’s strengths vis-a-vis China’s?

DS: China and India have different strengths. So instead of just focussing on competing with them we need to focus on our USPs, and should try to enhance them further. There are many sectors such as auto, pharma, handicrafts, etc., where we are doing much better than them. We have a transparent judiciary and hence everybody has a platform to speak up unlike the case in China. With respect to attracting FDI, our democratic ethos puts us at an advantage. Unlike China, we have an independent judiciary that can assure investors against fraudulent practices.

TDB: Is it fair to say that ‘Make in India’ has been very effective?

DS: Have you really seen any growth in the manufacturing sector in India? No. Has there been an increase in the share of manufacturing in the overall GDP? No. It has remained stagnant. Now let’s probe the reasons - even though the current government has the mandate of the nation and they have been suitably supported by the corporate lobby of the country, they have not been able to fulfil their promises. My personal take on this is that over-concentration of power in the PMO has made other ministries dysfunctional. The PM is not granting sufficient autonomy to independent ministers who are handling specific functions. Such a scenario hurts the manufacturing environment of the country and is affecting even its own pet projects including ‘Make India’ or ‘Digital India’.

TDB: What are your views on the big-bang demonetisation drive?

DS: See, we as the Congress Party are not against demonetisation per se. We are against the way the government is trying to implement it.
About 86% of currency in our country is of 500 and 1000-rupee denominations. So, suddenly taking out such a huge volume out of the fiscal system is bound to have far-reaching consequences. There was bound to be a scarcity. And that’s where this government has failed. They did not take enough precautions.

Enough 100 & 50 rupee notes could have been printed in advance, so that the remaining 14% that we are now talking about could now be at 25-30% levels, and that could have been a big relief (albeit temporarily) to the common man. Their circulation could have started about two or three months in advance.

TDB: But the government claims that this ‘demonetisation’ move was a planned one...

DS: The government claims that this move was planned about 10 months back and that this is not a knee-jerk reflex. If that was true, then how is it that the banks do not still have enough new 500 rupee notes? I was told by a senior banker that till the night of 9th November, they did not have new 500 rupee notes. Even 2000 rupee notes were scarce. The recalibration of ATM machines to dispense the fresh currency notes should have been done in advance. We also feel that information was leaked to a select few who had a bulk of the black money. Also, there had been a sudden increase of bank deposits few months before the announcement. Many media houses have reported it. That hints at something fishy in the whole exercise.

Further, in a country of 1.3 billionpeople, you cannot experiment with the fiscal policy of the country on such a big scale. Do you really believe that the move will curtail black money? People who have black money are not likely to hoard cash; they have investments in assets like real estate, jewellery, etc. Others have cash stashed away in tax havens abroad, which are traditionally considered a much safer option than keeping cash at home. They have the means of recycling the whole thing.

Actually, only less than 2% of our population have black money. So why are the innocent 98% being punished for it? Is it really in the larger public interest?

TDB: Let’s head west. Trump. White House. Resounding victory. Next man to run the most powerful nation in the world. Surprised?

DS: I think even Americans were surprised by the results this time. A man of paradox and contradictions has taken the reins of the world’s biggest superpower. What more can I say? He is a man led by his own whims and fancies, and not by rationale. If that was not the case, what could explain his intent to deport 3 million people from US. Has he even identified them? Plus, look at his statements against Muslims and women. The very ethos of America as a land of opportunity is under attack now. If you listen to the speeches of Abraham Lincoln and Thomas Jefferson, then you can understand what made America great. As far as India is concerned, I am worried about NRIs in US. Will they be able to withstand the discrimination by Trump’s supporters? They [NRIs] need to realise that Trump’s supporters are people who don’t like immigrants and Hispanics. Today I see a new neo extreme right emerging in the world, somewhat similar to the fascism of the thirties and forties. This is a worrisome phenomenon.

TDB: What are your views on differences in the style of functioning of the UPA and Modi government? And what about the Indo-Pak relationship?

DS: Modi has somehow not been able to evolve from his Gujarat CM style offunctioning. In Gujarat, he could have survived with a limited worldview – bashing Pakistan for political gains, but now that he is our Prime Minister, he needs to act like a true statesman. India is a multi-ethnic and multi-racial society. Atal Bihari Vajpayee had said, we have a choice in everything, but we cannot choose our neighbours. Our PM somehow does not understand this. Else why would he be hellbent on straining the India-Pakistan relationship so much? The government of the day must realise that we are an important part of the SAARC bloc. SAARC could have been a successful platform, but due to our non-cooperation with Pakistan, we are not able to showcase the true strength of such an important platform. Acts of terrorism are common to both these countries. How can he discount the importance of a dialogue? Pandit Nehru had said that ‘majority’ communalism is more dangerous than ‘minority’ communalism. Today majority communalism is seeping into our country. Today imperialism is based on economic considerations. If China wants to construct a corridor to access Europe they will be in good terms with Pakistan and Afghanistan. Russia too will be their ally. We somehow seem to be ignoring these realities. Our foreign policy stance has to be based on these realities. We have also soured our relationships with Nepal just because they did not incorporate the Hindutva angle in the constitution. I feel all this is also stemming from the fact that we do not have a pragmatic, globally-oriented external affairs ministry. Rather what we have is a policy drafted by the PMO and the national security advisor (NSA). Our NSA may have been a great spy, but that doesn’t make him a foreign policy expert.

TDB: MSMEs are India’s backbone. Do you believe the current government is doing enough for them and helping them stay competitive?

DS: They are the core of our economy. For them we need simpler rules and regulations, more freedom for self-certification, more avenues for finance and some handholding in selling their produces.
Just like the Securities market, why cannot we try to initiate a separate Stock Exchange to encourage people with their savings to invest in MSMEs? VCs too should be encouraged to fund this sector. And those people who have money should be given tax benefits for investing in such MSME-based VC funds.

When the UPA was in power, we created a provision by which 4% of all government purchases had to come from SCs and STs, but that has not taken off yet. Why this example? My point is that similar handholding acts can boost
India’s MSME sector too.

TDB: What about India’s exports performance? How has the current government fared on this?

DS: Going by official figures, when we [the UPA] were in power, exports ‘increased’ at a CAGR of 14.2%. Under the present regime, exports have ‘fallen’ by a CAGR of 8.6%. Honestly, global slowdown isn’t enough an impediment to justify the lack of fire in India’s exports. During our regime too there was a global recession. But the results were heartening. We could manage such impressive figures because of the confidence that businesses in India and overseas had in our government. Foreign investments have to come in. We want to assure investors of safety in terms of investments. See, short term investment come and go but for the long term FDI, a conducive investment-friendly environment must be created. In today’s age of digital world, any news about communal riots or discrimination against women and minorities sends the wrong message to investors abroad. Such an image is not at all conducive for our country. Instances of communal violence, etc., are viewed very negatively by the global investment fraternity and need to be obliterated. Law and order is intrinsic to the economy’s well-being. This is the reason why all these trips of PM Modi haven’t translated into any big gains for Indian economy.

TDB: What are your thoughts on the recently passed GST bill? Is the 4-slab rate announced by the Council fair?

DS: We are supportive of GST. They should however, have had a single tax rate. We do understand that in India essentials cannot be too highly taxed. However, alcohol and petroleum should have also been in its purview. I would say that GST should be implemented slowly and with caution.

They should not rush into the whole thing. We are still not a country where everything is done on the Internet. The only country in the world where that’s done is Sweden. Hence we need to have a GST that is viewed as practical across the country. Given the Demonetisation chaos already in the country, the country can obviously not afford another chaos. The new GST regime has to be designed for better implementation. We need to work on many fronts for the smooth implementation of GST. On one hand there should be in-depth training modules for tax collectors and on the other, training and awareness campaigns for the public and businesses must be undertaken.

TDB: Your message to global investors:

DS: My only message to the global trading fraternity is that both the ruling party and the opposition party are [almost] on the same page when it comes to this. We want foreign investments to come in. And for the purpose, we want our ease of doing business improved.

We want to assure global investors that India is a safe country to invest where we have an absolutely transparent judiciary with tools such as right to information among others. These are freedoms that differentiate us from countries such as China. We are an ideal place to invest in.

TDB: What is your forecast for the 2019 general elections in India?

DS: I think BJP has peaked with 283 seats in the lower house. Now, they can only go downwards. To what extent that will happen, we will witness in 2019.