Nirmala Sitharaman: ‘Economic buoyancy can't be overstated; else, we wouldn't have been where we are'

Indian Express

a day ago

From welcoming the idea of the India-US trade deal to a raft of 'second-generation reforms' to be unleashed soon, Union Finance Minister Nirmala Sitharaman in a free-wheeling interview with The Financial Express . Excerpts:
How difficult is it for a sovereign country like India to put up with President Donald Trump's unilateral statement that the US will 'open up' our economy, when the trade talks are just underway?
In fact, I would like to see it also from the Indian side. The US is one of our leading trade partners, topmost, if anything. At the junction we are in, and given our growth goals and ambition to reach Viksit Bharat by 2047, the sooner we have such agreements with strong economies, the better they will serve us. So, I'd rather put my own statement on (Trump's): 'Yes, I'd love to have an agreement, a big, good, beautiful one; why not?'
But, what are the red lines India has drawn?
The negotiating team ensured that industry's concerns were all taken on board before they sat at the table for talks. Agriculture and dairy have been among the very big red lines, where a high degree of caution has been exercised. There are some areas where one can always look at, seek greater market access for us, and also open up.
Even in agriculture, there're areas with little or no domestic vulnerabilities…
Possibly. But that (opening them up) is only with the consent of the department agriculture. There's no way we could do anything that which would weaken our agriculture, our farmers' positions.
You had reiterated recently that, 'tariff king' tag doesn't befit us. Our applied tariffs are mostly low…
We have only eight duties, inclusive of zero tariff. There have been drastic cuts of tariffs in the July (main) and February (interim) budgets. The effective tariff rates are (lower than the limits) announced in the gazette with Parliament approval, which is itself far below the WTO boundary. So, for India to be called a tariff king and so on is absolutely unjustified.
Yet, there's scope for further lowering of tariffs, without causing any harm to domestic industry…
Those are the points on which the negotiators will have to work with the country concerned. So, (our) tariff being a consideration is being addressed. Sector-specific considerations on agriculture, dairy etc. are being addressed too. Other concerns of the industry — automobile units, etc. — are also being addressed with deep consultations. I will credit the Commerce Minister (Piyush Goyal) for having had consultation prior to, during, and after the completion of the negotiations.
The US tariffs are already very low. Do you see any further reduction for us?
For reducing duties, the US President has to go to the Congress, a time-consuming process. So they may pitch in for it (duty cut), but it has to be done after the agreement.
Could it be part of the broader deal, if not the interim one?
Yes, it can be.
Could India offer any major relaxations to the US on the non-tariff front — IPR, data localisation, government procurement and such?
Our approach has always been that the trade negotiations should not get initiated by non- tariff concerns. Issues such as environment, gender, sustainability, carbon tax, government procurement, industrial relations, haven't been strictly part of trade negotiations. But it's now become a part and parcel of the whole thing, and we therefore take well-considered discrete positions.
We just can't walk into it, because India is an emerging market, with our own market requirements. On government procurement, a lot of carve-outs have to made, to ensure purchases from MSMEs, start-ups etc. Our domestic procurement itself is very considerate towards those sections that need hand-holding. We can't open it up for someone without these concerns addressed.
Manufacturing has ceded some share in GDP
It's clear from the policy we announced that labor-intensive units will be given support. We have been specific that handicrafts, handmade goods etc. will get succour. So there is no way in which we are choosing between one (labour) and the other (capital/tech). Manufacturing, whether it is employment-intensive, or requires automation, policy support will be given. But these lines are becoming thin.
Textiles & apparels, for instance, has conventionally been a labour- intensive sector, but it is being rapidly automated. A large knitwear unit in Tirupur, which used to employ, say, over 30,000 people, has now brought in AI to aid the production process, leading to increased productivity. A third of its workforce may now not be required to do what they were doing earlier. You cannot grudge that. But such units aren't retrenching people; rather they try to upskill them for gainful employment.
A complete recast is happening even in labor-intensive industries, to the extent that traditional labels don't hold. Of course, despite this, there are some sectors where automation doesn't come in so quickly; even among a section of manufacturing units and MSMEs, automation may not be an alternative they would want at this juncture. We have to have a policy for them, to facilitate credit access to them. So the long and short of it is there is no longer the old watertight areas, the old silos are now opening up horizontally. Everybody has to be updating on their skills, and everywhere. There is fluidity in the labour market; some are becoming movable, fungible, and others, going upwards.
The RBI monetary policy has gone in for not just a sharp cut in policy repo rate, but a CRR cut also. This has taken many sections by surprise, because the liquidity was already there. Some would say this showed that the RBI had a sense of foreboding, and was in a desperate move to stave off a slowdown.
Now, the RBI's front-loading in the interest of growth cannot be imputed for a knee-jerk reaction. Nor is it correct to say that the RBI is doing this, as it probably sees something which we are not. Institutions such as the RBI, which have a record of good documentation don't do things that way. RBI doesn't simply undertake interest rate reduction or increase, but explains its moves in the minutes of (monetary policy meeting) in detail, and these are put out in their entirety.
Investment-driven growth is inordinately delayed. Gross fixed capital formation fell to a 3-year low of 30 per cent of the GDP in FY25, whereas the aspired rate is 35 per cent-plus. How feasible is a broad-based investment cycle, which includes the MSMEs and other segments, rather than just the big corporates?
There is a buoyancy in the economy, which cannot be overstated. Had it been absent, you wouldn't have remained where you are (in terms of growth), with institutions periodically updating their forecasts (S&P has recently revised India's FY26 growth estimate upward to 6.5per cent). Or you would not have generated (consistently high) GST revenues.
In fact, today, people are using the GST to indicate how strongly the economy is moving forward. (GST receipts at over 7 per cent of GDP seem to have crossed VAT/excise-era levels). In GST, the data is very clearly, openly laid. You see the states and sectors where it is getting collected from. So the economy in its multifarious indicators is showing vibrancy.
Of course, we would like to have higher growth, even 10 per cent, and we are only at 6.4 per cent (gross value added in FY25). But it's still 6.4 per cent and not 2-2.5 per cent, which is where Europe, and even some of the Southeast Asian countries are.
So I'm not gloating at this number, but to repeatedly lamenting it is (uncharitable) given the global scenario. If Indians are working and moving the needle despite heavy odds, we should recognise it. Countries which are known for exports are no longer able to grow with such strategy. At this time, Indian exports are doing well.—FE