Nirmala Sitharaman, Minister of Finance and Corporate Affairs for India, spoke with CNBC in a post-Budget interview, aired on CNBC's flagship morning show, Squawk Box Asia. Edited excerpts
Tanvir Gill (TG): I want to start off by understanding your growth projections for FY21. You’re projecting growth to come in at between 6 and 6.5 percent, a strong rebound is expected from the current 5 percent. Would you say your projections are realistic or optimistic given the current global economic environment, also, considering the fact that domestically, the financial sector is under stress?
Nirmala Sitharaman (NS): I would say it is realistic. And in a way, if you also look at what the economic survey, which is independent of the Ministry of Finance, which is compiled by the chief economic adviser, has projected, I think, somewhere we're all on the same page, but some margin.
I say it as realistic because we've taken various factors concerned on board and expect the revenue generation to improve, which it's already showing signs of. And if revenue generation improves with the commitments that we have made because of the nature of things now for expenditure from government side, essentially investment into infrastructure. And when you spend on infrastructure, you also have some immediate gains because it puts money in the hands of the people.
Core industries survive because of the demand, which will essentially drive up the investments. And therefore, I have reasons to believe that consumption will increase from that end also. So therefore, with income or the government's revenue generation on the one hand showing signs of improvement and on the other I'm looking at spending and investment bearing some results immediately in the short term. I expect my growth rate to be where it is I’ve said and therefore it's realistic.
TG: What is the anecdotal evidence that you're gathering, with certain lead indicators that gives you the confidence that the economy could be nearing a bottom or could be bottoming out soon enough? I’ll tell you some of the lead indicators that I’ve picked up. One is, tractor sales for the last couple of months have been picking up. I'm told that the winter crop sowing has been at record levels. GST collections have edged up. Anything that comes to your mind, which gives you the confidence that revival is in the works?
NS: The three that you've mentioned are very good examples which have been reinforced similarly by many other sources.
TG: Are these sustainable trends?
NS: I think so. And also, the rains that have come recently have also reinforced this belief, which was coming out during the sowing season, some months ago. With the crops benefiting from this recent rain, we expect this winter crop also to come out with good yields, which will mean that in the rural areas there will be more money for circulation. We have also seen this in the automobile sector. I'm not speaking for everybody, nor am I giving a complete story. The automobile sector has largely cleared its inventory, with which they had a problem rightly when we had presented the July budget. And immediately after that there was this very serious concern that the inventory is remaining, demand not really picking up. This has affected the automobile sector to a large extent, particularly because it pertained to the emission standards of the last generation. From April 1, we're going to have a newer one. So anecdotally, it's believed that many of them have cleared inventory belonging to the earlier emission standards, and those who are selling newer emission standard compliant cars or passenger vehicles are now telling clients to wait for a couple of months before the delivery is going to be made. So I see that as one of the signs of revival of demand.
Similarly, we are also getting anecdotal evidence confirmed by certain industry leaders that flats or houses sale are really picking up. Some announcement made a month ago for availability have seen quick pick-up within two weeks. So there's a revival even in the home buying segment.