New Delhi, Feb 2 (PTI) Following is the transcript of the interview with Finance Minister Nirmala Sitharaman by PTI Editor-in-Chief Vijay Joshi.

Vijay Joshi: Thank you so much for talking to PTI. It's your first interview on video for PTI, so we are very appreciative. Congratulations on this, on this budget. Firstly, because it's your eighth straight budget, no other finance minister has done that. And secondly, it has been received very well by the people. It has been called people's budget, almost a revolutionary budget.

Nirmala Sitharaman: Thank you. Thanks for sharing your feedback.

Q. I am just intrigued, like I said, it's a revolutionary budget. At no point in history has the tax burden reduced so much in one fell swoop. What was going on in your minds...the policymakers? What was the inflection point where you said, this is necessary, this is what we need to do? FM: Well, there are a couple of things which have been in the works for some time. One is the thought that the direct tax should be made simple and that it should be safe for compliance. Direct taxation or the Income Tax Act will have to be a lot more simpler. So that work was announced in the July 2024 budget. Within six months, we were getting ourselves ready to get that income tax, the new Act ready.

In the process, the emphasis was more towards simplifying the language, reducing compliance burden, and also to make it a bit more user-friendly and not letting it suffer due to various interpretations, which also was sought to be termed as rent-seeking tools. We were essentially working on that. It wasn't about rate restructuring, although for several years now, we have been looking at the ways in which the rates could be a lot more reasonably taxpayer-friendly.

Equally, after the July budget, there was the voice of the middle class, which felt that they were ending up paying taxes. They were absolutely proud and happy to be taxpayers of this country, but also felt they didn't seem to have much in their way to redress their problems. And there was also the feeling that the government was very inclusive in taking care of the very poor, focusing on vulnerable sections and so on.

So the voice which came wherever I travelled was that we are proud taxpayers. We are honest taxpayers. We want to continue to serve the country by being good taxpayers. But what do you think about the kind of things you can do for us? Also, I had this discussion with the honourable Prime Minister who put me on the specific assignment of seeing what is it that you can come up with. And therefore, we did within the ministry work, and briefed the PM on what is before us, and guided by him we've come up with this.

Q. Was he on board immediately, as soon as you went up with this proposal because it has a lot of financial burden on the exchequer? FM: Yes, there were different aspects to getting this proposal. So, with the new income tax act coming as a bill in Parliament, it was also time for us to take a call on it and not wait for the new bill to come up because the intention of the bill, as was stated in the July budget, was not to talk about the rates. That was essentially a finance bill.

Q. I'll just push you on this a little bit more. How much did it take, how much persuasion did it take to get the Prime Minister on board, or was it a lot more complicated? FM: No, I think your question should be, how much did it take for me to convince the ministry and the board? So, it is not so much the PM. The PM was very clear that he wants to do something. It is for the ministry to have the comfort level and then go with the proposal. So, more work that was needed was convincing the board about efficiency in collection and honest taxpayers' voices. All this was work here in the ministry, not so much for the PM.

Q. In other words, the bureaucrats were the ones who needed to be convinced.

FM: They are right because they have to be sure of revenue generation, that is their job, and therefore it is for them also to feel sure that the field formations will be doing their job and not deny the legitimate revenues which have to be raised. So, they were not wrong in reminding me periodically, saying, what would it mean? But ultimately, everybody came around. So it was only after that that we went to the field.

Q. So in other words, you heard the voice of the middle class, and you responded? FM: Prime Minister Modi and his government have always heard the voices of people from different sectors... industry leaders he meets, personally interacts with them, gets the inputs. He would also talk with the most deprived sections ...tribals, particularly vulnerable tribal groups, just as Rashtrapatiji is very keen on addressing their problems. Prime Minister also listens to all sections in the North East, particularly sections in the scheduled caste. I'm very happy to be a part of this government, which literally hears the voice and responds.

Q. It is just the beginning. Is there more to come in terms of tax reforms? It looks like so many people are going to benefit from it. Would the ultimate aim be to increase the tax net? FM: Obviously, with this and without this, the attempt has always been to widen the tax net so that more Indians, who are in a position to pay come on board.

Q. So, maybe in the future budgets, widening the tax net would come.

FM: That attempt to widen the tax net is a continuous, ongoing exercise.

Q. India has about 8.65 crore people in the tax net, if you include people who don't pay taxes, who file tax returns but don't pay it comes to 10 crore. Of the 144 crore population, it is just minuscule compared to what it should really be. So, where is the gap? Why are there so many more dishonest taxpayers? FM: I won’t say, dishonest taxpayers. I think many people who are just outside of the fringe should be nudged to come in ...who have never been taxpayers or who have now reached that level of income, or even those who have avoided tax. (They) will all have to be brought on board. So, that is certainly a task before us. We have to make sure that people understand the role of paying taxes and bring them on board.

Q. It's a national duty to pay tax. Can this be done by reducing the tax rates, maybe further? FM: Haven't we done it this time? That is the first step towards the new tax bill. We didn't wait for the new tax bill to carry this rate reduction. This was something which we meant anyway. So, we brought it. The new regime ... has certainly shown that rates will have to be steadily brought down. This time we made it smoother.

The tax slabs are also smoothly flowing from one to another, and the rates are also very predictable in multiples of five. Lots of thought has gone and I must appreciate the board and also the TRU, the division which takes care of the revenue matters, and the Department of Revenue, as they have done intense work, literally engaging with me on a day-to-day basis to make sure that we come up with rates which are going to be easier and acceptable. And it is not just an attempt to give benefit to one small section of the taxpayers. Everyone, who's paying tax, will get something beneficial.

Q. Our growth, at least the GDP growth rate for this year is projected to be 6.4 and for next year maximum will be 6.8. We want to achieve 8% to become Viksit Bharat by 2047. Do you think, the new tax regime will increase consumption? How much will it help in contributing to that GDP growth? FM: I wouldn't want to predict something, but certainly this tax proposal will ensure that people have more money in their hands. When people have money in their hands, they make their judgment about whether they want to spend it entirely or spend some out of it, and also make sure that they save something else, some amount from it.

I expect this would show both in terms of consumption spending and also in terms of savings, which can be through very many different instruments, both will be influenced. But I won't want to directly say this is the only way we are looking at growing up to 8 per cent. These are steps which will have implications for the near term and the medium term.

So many other things also will have to simultaneously happen, which we are clearly indicating in the budget Part A, through which India will open up so many more avenues for its growth trajectory. Their collaterals and their secondary effects will certainly ensure that we move towards that.

Q. In addition to the increased consumption, what are the other factors that are needed to reach the 8% growth? FM: There will be a lot of secondary effects from those proposals, in part A, which will themselves trigger a path towards growth. And also, the way in which we've looked at customs, tariff rationalisation, import of essential goods coming down ... are all indicators towards propelling greater growth.

Q. Your revenue projections are pretty optimistic, and at the same time, you are also sacrificing Rs 1.3 lakh crore through tax cuts. Where are those revenues going to come from? How optimistic are you that you will be able to meet those projections? FM: I thought I was accused of always being conservative in my estimates, and I've every time said our numbers are realistic because we do a lot of work and understand that we are definitely not exaggerating our targets. At the same time, we do not want to be underestimated, and for domain experts later on to say, you've underestimated today. You're performing this much is not great. We have always shown realistic numbers.

Q. On infrastructure spending, it's a little disappointing that you have not allocated as much as was the expectation. Could you have done better in capex? FM: If we are looking at the numbers because we've got used to a 16-17 per cent increase every year from 2020, and saying you have not increased it by that number... I would equally want to ask you to please look at the way in which the quality of spending has happened, particularly capital expenditure and I must appreciate the states which received the 50-year interest-free share of the money which went from our side as capital expenditure for them.

They have also shown very great interest in capital expenditure and the quality of expenditure, therefore has been very good. At the same time last year, when we touched Rs 11.11 lakh crore and this year building on it, it is about Rs 10.1 lakh crore over the RE which is far more realistic.

2024 has had the difficulty of elections happening... difficulty, I say, from the point of capital expenditure. Elections are very much a necessity. During the election year, which we've just completed, the capital expenditure did go a bit slow. Otherwise, my RE would have also been closer to BE number again.

Q. The opposition is saying that this budget was entirely for Bihar and in an indirect way for Delhi, both of which are going to the elections--Delhi in a few days, in Bihar in a few months. What do you have to say to the opposition? FM: I think, for want of criticism, they seem to be picking up. I'm sorry to be so blunt. I've said this even last time when they alleged me of announcing only for allied partners, Andhra and Bihar were the only two names. Nobody has had anything else coming. I think these are lame and lazy, quick ways to look at the budget. Every state gets its share of all the central schemes ... gets their due grants-in-aid, which are decided by the Finance Commission.

Every state gets a part of the due for the expressways, freight corridors, railways, airports and some big ticket seaports, which are also getting built. Each year, I don't announce them, but they have been funded by us for over several years. Major port projects are never completed within one year so that money stops the next year when I don't name them? No, it still goes to them. So it's all right for them to have to comment if something is fine, but I'd rather want them to go through the details of it and engage constructively.

Q. There is even an outlandish suggestion by some leaders in the South who have said that maybe they should produce more children so that they can get more contributions from the Centre because they are unfairly being targeted because their population is lower compared to the northern states. Is that a valid observation at all? FM: My response to that is that it is for the states to engage with the Finance Commission to express their concerns about the parameters based on which the tax devolution principles are laid down by them. And if they think over a decade, they've had a distinctly different paradigm happening there, it is for them to highlight those issues to the Finance Commission. After all, the Government of India takes the Finance Commission's recommendations, particularly on the core suggestions, and follows them. And then voice concerns, as though this Government of India has decided is not a healthy strategy.

Q. So you would say that this suggestion that they should produce more children is ridiculous...

FM: No. I'm not even commenting on it because whatever their point of view is, it is based on what they think the Finance Commission is coming up with. It is for them to highlight to the Finance Commission whatever the principle be, or whatever the factor be.

Q. I have one more question about the States and about Delhi. We have all been talking about freebies in elections, and the BJP has always been opposed to freebies, but this is happening in Delhi, and everyone is offering freebies. What is your view on this? How do you see this? FM: I strongly feel that states and their capacity to take on such welfare measures will have to be studied before announcing any such scheme. I strongly believe such homework is done by BJP-ruled states and only then they announce it. Take the example of any number of states which were ruled by the BJP. While going to the elections, they come up with solutions ...they have been budgetarily provided for unlike (some other states). I'm sorry to take examples of one or two states. I'm not even naming them. They gave very big promises and then their budgets are not even able to fund those promises.

Q. You're talking about Punjab… FM: Punjab, Himachal, Karnataka had a fairly good financial fiscal situation. They are now reaching situations in which they are not able to fund themselves... Also, you will look at the intergenerational burden that they are putting on. As the current generation cannot bear (the burden)..you're passing it by borrowing money and putting it on to the next generation. People immediately say that the central government's borrowing is also (increasing). Yes, during COVID, we borrowed it. Borrowed big sums. But haven't we in the last budget, which is the July budget, very clearly showed an indication that we want to bring the debt-GDP ratio down.

In this budget, I've given a framework for it to show how by 2030, we will bring India's debt-GDP down to close to 50% plus minus 1%. We've even given a good schedule to say how that is going to happen, also understanding the position of fiscal deficit in that context.

Q: The new US President has started a trade war with Canada, Mexico and China and imposed tariffs. China has retaliated and so has Mexico. Is India worried because Mr Trump has called India a Tariff king? FM: I'm not worried. I am fairly looking at India's position. We want India to be a manufacturing hub. We have strength in our services sector. India has indigenous capability in terms of software, Artificial Intelligence and STEM-based research. I would think that India's strengths will have to be kept in mind as much as capacity for removing the challenges. High tariffs for instance, in the recent Budget...we mentioned the critical minerals sector.

MSMEs having high tariffs is not going to help them. Because some of the products which are not available in India, we have to import them. I don't gain anything by having a high tariff and stopping those products from coming to India. I need to have a balance and keep in mind India's interest as regards production, manufacturing, and MSMEs.

Q: The rupee has depreciated almost 3 per cent since last year. What do you think are the reasons for it? It has become more of a political issue and is used as a political weapon to criticise the Govt. What do you think are the reasons for it and what impact will it have on the Indian economy? FM: Rupee's volatility is against the dollar. The rupee has behaved in a far more stable fashion than any other currency. If the dollar is strengthening and strengthening, the rupee's volatility will be noticeable. RBI also has been looking at ways in which it will interfere in the market, only to stabilise the need for avoiding huge volatility. We are all closely watching the situation.

But for those who don't get into the details of what causes the rupee's volatility and depreciation, yes... it is a very quick argument. But in today's dollar-strengthening environment and in the new US administration, the rupee will have to be understood in its relationship with the dollar. The fluctuations which come as a result of that. Criticisms can come, but those criticisms will also have to go with a response with a bit more study.

Q: So you are not concerned? FM: I am concerned. But I will not accept the criticism that the rupee is weakening! Our macroeconomic fundamentals are strong. The rupee wouldn't be stable against all the currencies if the fundamentals were weak.

Q: Privatization, it seems to have taken a back seat. What's the future? FM: Yesterday, in the press conference, the Finance Secretary elaborated on what is happening. Public sector undertakings were in a very distressed situation. Many of them had not even been attended to for a very long time. MTNL is a case in point. BSNL is a case in point.

BSNL, I'm not suggesting that it is on the privatization list. But I'm saying the public sector has been completely ignored. BSNL was on the verge of suffering badly. It is since 2014 that we've given support to the BSNL repeatedly. As a result, today, it is having its indigenously made 4G. It will soon get into 5G. This is what I am hearing from the Minister.

So that is one example. There are several other public sector undertakings who in the meanwhile, for whatever reason, those which have Cabinet-approved decisions in favour of disinvestment, have also not been left by the wayside. Their valuations have gone up. Today, those very public sector undertakings are doing extremely well because of professional management.

It is one thing to say no disinvestment is happening, but another... please recognise how the PSUs are performing now and the valuations going up. The disinvestment programme, I am not saying has been kept in the wayside, but there are various difficulties that we've had, whether it is COVID, the second wave, then came the war. The global markets and their absorption capacities were also severely under stress. We will continue with our disinvestment.

Q: AI is going to play a huge role in our futures, and in our economy as well. What plans does the government have in allocating funds for AI? Very recently, the Prime Minister and I & B Minister Ashwini Vaishnaw made a big statement. What do you think? FM: Well, in the July budget, we announced the formation of three centres of excellence for AI. There have been specific areas in which we've said these centres of excellence will work towards AI... in agriculture, health and urban cities. Now there's one more, which has now been announced for education.

So, AI is very well being given the support, particularly with identified areas in which we want to extensively use it. Now AI, as you know, is also something which we are encouraging towards skilling. We want people to be skilled to use AI. We have come up with a programme earlier also, and even now, in this budget, hub-and-spoke model in five different parts of the countries.

We will have overseas skilling schools, which are very good. ... we have made a provision, even in the July Budget. We will invest in those equipment which are so needed for training in AI, and the master trainers will then pan out to those centres and train the Yuva from different parts of the country in those particular skills.

And for some years, the skilling certification will be given by the overseas training partner, so that the skilling is worth what they have had. So, in different parts of the country, for different skill sets, which are relevant for that particular cluster, is something which is aimed at and that is definitely going to also include training and skilling in AI.

Q: You have given a very decent fiscal consolidation roadmap. But it hasn't enthused Moody's. Ratings are still low. Do you think we have done enough to deserve a rating upgrade? FM: You ask me this question differently. Your emphasis seems to be very much the way oh! What more...Excuse me. Even in this kind of challenging situation, having borrowed the amount that we borrowed during Covid, facing the global challenges, increased questions on container movement, global supply chain problems and Red Sea problems... despite all these, we have shown a commitment and following the commitment to the last word as regards fiscal deficit and the glide path that we should follow.

Equally, to give a long-term perspective, we have said that we will manage our debt in such a way that the debt-GDP ratio will be continuously followed. The report which was submitted earlier on bringing the debt down in relation to GDP. We have volunteered to say that we will manage the debt. From last year itself, we said that we will manage our debt from now on so that it comes down to the level recommended by the N K Singh Committee.

These are the steps which many of the advanced nations are not doing. I'm not comparing my size with any advanced country. But, in terms of the principle, cutting down debt to GDP, maintaining fiscal deficit-- these are relentlessly being followed without any negative impact on social welfare schemes, education or health. Or even the public expenditure which is necessary to trigger growth. The capital expenditure has not come down. We follow the two cardinal principles -- to keep your fiscal deficit (under check) and also to borrow only for meaningful capital expenditure.

Q: I'm going to ask you a question which has got nothing to do with budget or economy or anything else. It's purely political. Would you like to talk a little bit about the prospects of the BJP in Tamil Nadu, which is going to elections in early 2026? You are also being projected as a possible CM candidate for Tamil Nadu.

FM: Where is it coming from? No way. I'm doing my job as finance minister.

Q: But what do you think now that Mr. Annamalai is no longer in the picture? What are BJP's prospects? He is the President. But one could say that his worth is seen as reduced because of the loss in the Lok Sabha elections.

FM: Oh, come on. That's very unfair. He is the party president, and elections to party president go by a certain calendar for all states, nothing particular about Tamil Nadu. I think these speculations are not good for the party.

Q: Are you interested at all in regional politics, in going to the state? FM: Well, I have been brought here by the party, and I am doing the party's work. I do only what the party says. I have no choice in this.

Q: How would you describe in a few words or one or two sentences what this Budget means for the people of India? FM: I think the Prime Minister put it succinctly. He said people’s Budget, it is the Budget that the people wanted. It is Budget as they say in democracy, in Abraham Lincoln’s words -- it is Budget by the people, of the people, for the people. PTI VJ ANZ CS BAL BAL BAL