‘This Budget has a one-year agenda, which you can call the sprint, and the marathon is towards Viksit Bharat.’

Illustration: Dominic Xavier/Rediff

The India-US trade deal, had it come a little earlier, would not have made the Union Budget any different, Finance Minister Nirmala Sitharaman tells Asit Ranjan Mishra, Vikas Dhoot, Nivedita Mookerji and A K Bhattacharya on Wednesday afternoon at her Parliament office.

Edited excerpts from the interaction that ranged from headline numbers to policy focus, reforms and more:

Part 2 of a 3 part interview:

 

You have proposed in the Budget that SEZ units would be able to sell in the domestic area because of the whole global uncertainty. Do you think that is still needed even after the US deal?

As I said, let it get crystallised. Till then, a one-time, specific measure is there and it will remain there. It’s anyway intended to be a temporary measure…

What you are allowed to sell in the domestic area will be in a certain proportion to what you are exporting.

You cannot completely forfeit your export obligations and shift everything to domestic. That’s not the aim.

On the debt-to-GDP front, you have targeted a 50-basis-point reduction this year. But you want to bring it down to 50 per cent at the end of the 16th Finance Commission period.
That would mean in the next four years, you have to reduce it by more than one percentage point each year. Do you think you are back-ending the debt-to-GDP reduction?

You could say that, but I’m saying that with a bit of a hesitation, because I do not want that burden to be completely pushed to the rear end…

I would like to have some breather later… I will steadily increase it, but not really push it to be back-ended.

It might give you that impression now. But as I said, this Budget is taking care of one year, five years, 25, years, so I had to play it.

Usually you don’t cut your capex to meet your fiscal deficit. Do you think 2025-2026 (FY26) is an exception?

No, I had gone through it even before we finalised the Budget numbers. Many departments are yet to give me utilisation certificates.

States are sitting over utilisation certificates. I cannot release the money without the utilisation certificates. I’m not pointing fingers at one or two states. Many states have this problem.

Economists expect the Budget to give a 0.6 per cent to 0.8 per cent boost to the growth trajectory in the coming year.
On the indirect tax assumptions, you have been conservative at a tax buoyancy of 0.2.

I don’t want to let down the economy… In any other sector, minor slips are absorbable. The finance ministry number is as good as cast in stone.

I have to be conscious of that. Otherwise, the credibility that you obtained in the five years with fiscal discipline, and being transparent in Budget — everything will be shown and we are not going to do anything outside of the Budget.

These are hard earned, and I have to come up with the number that is not going to fail the confidence in the economy.

Is there anything that you are considering to catalyse foreign investment flows into the country?

When foreign investment net went out a year, eight months ago, our macroeconomic fundamentals were strong even then, people booked profit and went out.

The fundamental macroeconomic indicators were strong then, strong afterwards, and are strong even now, but then for investment to come in, there’s something else.

If you take the reaction to the day before the phone conversation between the two premiers (referring to the phone call between Prime Minister Narendra Modi and US President Donald Trump on February 2), you can see the weathercock.

Look at the big funds… also see the environment now having a different air, freshness, smell and so on.

So I expect the flow to come through, because the chief economic advisor was right when he said, “Your macroeconomic fundamentals are right, you expect everything to be fine for the funds to come in, but your rupee is up against a world which is not impressed by any of this.”

So I think that change of wind, your headwind becoming a tailwind is probably happening post the phone call.

Even otherwise, the Canadian funds, the Norwegian fund, the EFTA funds, were all happy, they were coming in.

The chunk that all of us look at is that fund which is waiting for a change in the temperature, flow of wind.

‘If a fellow wants to put his hard-earned money and burn his fingers, it’s his choice.’

IMAGE: Nirmala Sitharaman addresses a post-Budget press conference at the National Media Centre in New Delhi. Photograph: Press Information Bureau

Do you think the Securities Transaction Tax (STT) increase on futures and options (F&O) trading would be enough to dampen participation, which is the primary goal, or is more needed both from the finance ministry and the regulators?

No. More is needed, perhaps from the regulator. Taxing and taxing after a point doesn’t give you returns.

Total prohibition on liquor hasn’t worked in any state. Like that, there’s a limit to what you can do even if you want to deter.

So I don’t think there is more to do from the finance ministry.

You can only keep telling them it’s dangerous, it’ll cost you more, don’t speculate, but you cannot do it after a point.

If a fellow wants to put his hard-earned money and burn his fingers, it’s his choice.

It’s not anecdotal. A study said 90 per cent of people who were engaged in F&O trading have lost. So if that’s the case, the government can only do that much, it can’t do anymore.

‘The India-US trade deal happened and we welcome it’

On the US trade deal, one is curious about the back story. Were you expecting it to happen at this moment? What was the latest trigger?

I wouldn’t know whether I should say we were expecting that it would happen. No, it wouldn’t be fair on our part to say that we expected it to happen at a particular time or not. It happened, and we welcome it.

What’s the thought behind this high-powered committee on banking? Even in the last Budget you know, you’d announced a committee on financial reforms.

This one is more to see, if at a time when we are strong in our banking thanks to several steps that we have taken, I want to be sure that we will do the right things to make banks stronger, not just those existing ones.

Do we need new and big banks? Do we need new, big but private sector banks? Do we need more ways of funding growth?

There are several questions, all of which are critical for financing the Viksit Bharat pathways — 10 different pathways, one MSME, another is big industry, another is infrastructure.

There are so many different ways in which we have all got to converge on to 2047. How do banks engage with all this requirement?

Will bank consolidation also be part of the brief of this committee?

All that has been approved by the Cabinet, will happen anyway. Over and above that, they have to see.

Do you have a timeline in mind for setting the terms of reference and forming the committee?

I will come up with it soon, because I am keen to know what I have to do.

‘The Budget has a sprint and marathon’

The Economic Survey referred to running a sprint and marathon race at the same time to meet the Viksit Bharat goals.
Is there any clarity on where we should sprint and where it has to be a marathon?

No, that is why I have said this Budget has a one-year agenda, which you can call the sprint, and the marathon is towards Viksit Bharat, but the five-year (time frame) is there in between as well.

I’m also playing around with words when I say this, but the schemes that we’ve come up with for rural revival, cities as economic zones, waterways, you’re looking at both the immediate and the long term.

Skilling of youth, AI-driven for better productivity, whether it is for agriculture, whether it is for industry, whether it is for science and technology, opening up of very many more avenues through which such AI infused skilling can happen.

So there is a blend of all that in this Budget, the short term… setting up critical mineral corridors, that’s long term.

You have to prospect, then you have to extract, then refine it to make those which are required for your solar energy, for your hydrogen, for your semiconductors, for your robots.

But being dependent for the raw material itself from somewhere else has brought us to this pass that any small decision the other way hits us.

So Atmanirbharta on this is not going to be arrived within one year. That’s certainly a marathon. I’ve made a commitment and I will fund it.

Do we have enough deposits of rare earths like lithium?

I must tell you about the interaction that I had with the finance ministers before the Budget.

The state finance ministers said: “We’ve done enough to understand that we’ve got it, but we need to extract it. Would you help us?”

So the question of whether the deposits are there is already answered.

The question of whether the states will work with you is already answered.

So, I see that catalytic change happening sooner, and after that, of course, it’s going to have its own gestation period, but those initial glitches have already gotten over, because the states said it to me.

But apparently, Kerala has opposed it.

They’ve not opposed it. They’ve just said, you’ve not given us anything, forgetting that I’ve also announced their name in the corridor.

But they have got a better devolution…

Every year, during those five years (of the Fifteenth Finance Commission cycle), which still has two more months, Prime Minister Modi was accused of not giving enough money to the state.

I am not asking or wishing for it. Now that they’ve got it, they’re not thanking Prime Minister Modi. Now it’s the Finance Commission which has given it. That is politics.

IMAGE: Madhya Pradesh ministers, MLAs and party workers watch the live relay of the Union Budget 2026-2027 at the BJP state headquarters in Bhopal. Photograph: ANI Photo

‘Does Stalin even realise the value of defence corridor and rare-earth corridor?’

Tamil Nadu CM MK Stalin also made a statement that the Budget does not have much for the state. Do you feel that is unfair?

Tamil Nadu is the only state to receive both the defence corridor and the rare-earth corridor.

Any other state from anywhere else can accuse me of saying you’ve given it to Tamil Nadu and you’ve not given it to me.

Does he even realise the value of it? A high-speed corridor, taking a train to Chennai, connecting it to Bengaluru.

Does he even notice it? So somewhere, if your politics thinks that everybody is blind and deaf and mute, you can go on saying whatever you want. Do you think people don’t see it?

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