Nirmala Sitharaman interview: ‘More money in hands of people will spur demand’

The budget for FY26 puts money back into the hands of the middle class and taxpayers, a category that is “helping run the country”, finance minister Nirmala Sitharaman said in a post-budget interview with Doordarshan on Saturday. “I’m not viewing this as income foregone,” she added. Edited excerpts:

Why has the government foregone ₹1 trillion in revenue by changing the tax slabs? What is the economic justification behind this move?

I want to thank the honourable Prime Minister because it was his guidance that we keep aside the calculation of revenue foregone and put money back into the hands of people. Who are these people or category of people? They’re taxpayers. When we have to put money in the hands of people then it’s a different subject, giving free grains, giving pension to senior citizens below poverty line, we have several different categories. But this category of taxpayers is the one which is helping run the country, and the PM suggested that we should do some calculations by which the honest taxpayers get some relief. When we went back to him with our calculations, he immediately accepted it. So, I’m not viewing this as income foregone but giving more money in the hands of the taxpayers.

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You have made an additional ₹1.5 lakh crore credit guarantee provision for MSMEs (micro, small and medium enterprises) for the next five years. The credit will be available at what rate?

In the July (2024) budget, I had said that Sidbi (Small Industries Development Bank of India) will be now directed to open branches in industrial MSME clusters. The ministry of MSME has around 180 clusters. In each of these clusters, we wanted to have Sidbi branches. But Sidbi normally lends through the banks, which pass it on to NBFCs (non-banking financial companies) and they in turn pass it to small finance companies, who at every step jack up the interest rates. So, when Sidbi does it directly, the interest rates will be reasonable.

The usual complaint from MSMEs is lenders typically don’t understand their business cycle. When Sidbi operates, they understand their capital requirements. Our approach now is that the banks can continue doing what they do but if Sidbi can directly lend to MSMEs, then the interest rates will be more realistic.

The PM has thanked you and your entire team for the budget and said that this budget is force multiplier, encourages consumption, investments and growth. Would you explain how the budget would help in taking the economy from a sub-7% growth level to 8-10% level?

With this budget we’re stating one thing very clearly, that credit availability is essential for people. When wages rise, people also think of increasing discretionary spending, otherwise they narrow down their spends after keeping money for savings aside. We want that savings should increase, people should have some money left in their hands which can be channelled towards the health and education of their children, just like companies expect that demand in the market increases which would lead to higher production.

We’re not putting money in hands of all people, but in hands of the taxpayers, the middle class, that PM Modi has huge respect for since the beginning, to address the doubts that people had on expectations from this government. We got the taxpayer charter as well. This is a step in the same direction, of respecting taxpayers, trusting them with running their businesses and pushing the country forward.

Is this a way to tell global investors that India is ready for the future?

We’re also reviewing the bilateral investment treaty agreements, trying to make the format and sections more robust and certainly, whatever steps we can take to increase investments we will take them.

You have announced support to the leather, footwear products and toys industries. What kind of support can they expect?

We have been giving PLI (production linked incentive) for many of the products, particularly when it came to electronics. That has paid off well. There are some other sectors where we need to give a bit more push. We want to understand the requirement of these three sectors and support them.

For leather, we have tweaked the import duty, and export duty for some other items so that some value raw material can go out of India and small tanners can benefit from it. The measures are not just for incentivising one route of production, they are also for cutting costs in input production. Essential raw materials that are not available in India have to be brought in from elsewhere, so we have enabled reduction in duties as well.

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What about transforming India Post? You have made it into a logistics organisation.

Even today, the dak sevaks are performing multifarious roles. There is a huge network of post office all over the country. If we are not able to optimally use them, they can fall into bad days. We want to revive the connect that India Post has with people and make them one of the nerve centres in India’s growth.

Moreover, we want them to take up logistics function because many global marketing companies today want a countrywide network. So we want to do that with India Post.

Now that Viksit Bharat has been defined in the budget, will future strategies and policies be made keeping this definition in mind?

Absolutely. It is also an indication to states towards building their own economies. The indicators and identifiers of achieving Viksit Bharat status have been discussed in great detail over the last one year and decided upon by the states along with the Centre.

We’re planning in detail on the elements needed to achieve each of the goals, allocation on spending et al. The money that goes to states is also channelled towards improving the states’ competitiveness so that states and the Centre can take India in that direction.

How will the ₹10 lakh crore asset monetisation goal be different from disinvestment?

Disinvestment and asset monetisation are completely different. Asset monetisation is not selling off the property, but more about optimising its use and finding ways for people to use it.

If they can be put to use even by private parties then we can ask them to bid for it and take it on lease, and earn money.

The properties are going to remain with us. It is a way of monetising such assets which are otherwise lying idle. This is what we have done even earlier and based on the response, we have identified more such assets.

You also spoken of a light-touch approach for regulators. What kind of regulation will the asset monetisation process have?

We have a lot of consultation going on with the states. Many states have identified such assets which they want to use for their benefit. They could be Centre-owned assets which the states can then discuss with the Centre, and decide how they can be put to better use. The methodology in which it is being executed has already been shown in the first phase of asset monetization that was announced in 2020.

So, more such assets can be monetized in the same way. Whatever comes from this will be used for building new assets.

You’ve focused a lot on women in this budget. Also, can you give some colour on Indian knowledge repository being planned?

Digitalisation of manuscripts will be undertaken and this activity will be done across the country. Because majority of the manuscripts are in private hands, and we don’t want to take their copyright or possession rights.

We only want to request them to help us digitalise them, which will be available at one location for everyone. Researchers are interested in creating this repository. We’re planning to give access of this repository to everyone.

For women, each of the schemes that we’ve announced has benefits for four sections which includes women, poor, youth and annadata (farmers). The term loan for women is a new scheme which has not been named yet.

We’re trying to further the Stand Up India programme that we’ve been doing for the past nine years and we’ve had good success with it, by expanding it to benefit another 500 million people.

The bank branches in far flung areas would be able to give ₹2 crore collateral free term loan.

Under the SWAMIH scheme, 100,000 additional units will be completed. Is there enough supply to meet this affordable housing target?

There are a lot more projects which are unfortunately stuck. The middle-class people are suffering because they have taken loans and are paying their EMIs with the expectation that their house will be delivered within a certain number of years. There have been delays in projects by many years.

The first SWAMIH fund which was launched in the end of 2019-2020 has shown good, positive output. It is carefully monitored and money is released in a staggered manner, so nobody can divert the money for anything else. They are Rera-approved projects and it is a scheme which runs in a systematic manner, where we can also track the developments. We thought this is a sure and safe way by which people can get their apartments that are long overdue.

What is your expectation in increasing the FDI limit in insurance from 74% to 100%?

Even now, a lot of companies and investors from abroad have shown interest and are seeking ownership, and because of that there is a greater possibility of money coming in.

We have clearly said that the premium collected in India should be invested in India. We have made enough guardrails for it.

What is the plan for the National Manufacturing Mission and what are the outcomes you’re expecting from this?

India has huge potential for exports but before GST there was little competitiveness. Today, global volatility is creating challenges for our companies to find new markets for exports.

We have plans to provide them with export credit support through ECGC or Exim Bank which will be given more capital infusion so they’re ability to give more credit can be improved. Exporters also face issues of electricity costs and high logistics costs, specially if the cargo is coming from places like Chhattisgarh and going to sea ports.

We want to take the mission forward by keeping all these issues in mind and discussing with 32 export promotion councils on supporting them, will have to be worked out. For new market access, keeping reverse buyer seller meets in India, will have to be discussed.

An institutionalised mechanism for giving equal access to partners in free trade agreements will also be part of the mission. There’s also a plan to create a digital data bank and dashboard using Bharat Net.

What’s the purpose of the Maritime Development Fund for which you have given a corpus of ₹25,000 crore?

We have several ports and there are many possible use cases in each one of them. Other than that, there are ship breaking activities happened in India. Once, we were the leading ship breaking centre globally.

Today, the competition being different and the kind of environment consciousness that has come over, there is a problem there. We also want to promote building of ships of a certain tonnage or more, not smaller ones. We need support for that, which is why we have created this fund.

What should be the model for India’s energy transition and why is there a focus on nuclear power?

This is a very important announcement in the budget. Last time we announced the scheme for hydro- power stations for pumped storage which reduced cost and produce high power.

India’s energy consumption is going to rise in the coming years, we have to find a permanent renewable energy solution. We don’t want to go back to setting up coal or thermal plants, but we will use our own technology, which is in advance stages, to set up small nuclear reactors wherever we require it. We’ll open it to private sector as well.

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So many tax concessions, and you have a fiscal deficit target of 4.4% of the GDP. How is this going to be met?

We have worked out how far we can go with this. We are very clear that when consumption increases because of more money in the hands of the people, some of this money will be ploughed back into the economy.

Secondly, I already spoke about asset monetisation. We will also make sure we widen the tax net.

The PM has called this a people’s budget. How do you view this budget?

Yes, this is a people’s budget because what the people had asked from time to time, like making educational facilities, improving nutrition of children, for raising the number of seats for medical education, we’re responding to all these demands. This is why we’re simplifying the income tax bill which we’re bringing in the coming week.