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CNN-IBN's DEVIL'S ADVOCATE INTERVIEW WITH PRANAB MUKHERJEE, INDIA'S FOREIGN AND FINANCE MINISTER AND ALSO EFFECTIVELY ACTING PRIME MINISTER -- BROADCAST DATE: SUNDAY, Mar 1 8:30 P.M.

Karan Thapar: Hello and welcome to Devil's Advocate and a special interview with a man who is both foreign minister and finance minister, Pranab Mukherjee.

Karan Thapar:I want to start with your role as finance minister. On the basis of the advanced estimates, the government estimated that growth in the year ending March 31 would be 7.1 per cent. But on Friday, we discovered that the third quarter growth is just 5.3 per cent and growth between April and December is just 6.9 per cent. So can you accept that your growth estimates are clearly wrong?

Pranab Mukherjee: All these are estimates. Of course, between 6.9 and 7.1, there is not much of a difference. But I do hope that when final figures and performed figures will be available, it would be around 7 per cent.

Karan Thapar:So even though Q3 is 5.3 per cent and many people believe Q4 could be worse, you are still saying it will be around 7 per cent?

Pranab Mukherjee: Around.

Karan Thapar:When you say around how much margin are you giving yourself?

Pranab Mukherjee:Confirmed figures are still not available till the final accounts have been done. All these are just estimates.

Karan Thapar:People outside are saying the growth for this year may not be 6.5 per cent.

Pranab Mukherjee:These are all speculations. These are all estimates. Nobody has the earned figures. The economy, how it will respond to the stimulus package, how it is going to respond to the various steps that we have taken in the remaining period of the fiscal year. All these things are yet to be seen. For instance, revival of steel industries and cement industries has started. For housing estates, we have done adequate allocations. States have been provided with funds. They themselves have said, all these states taken together, having good cash results, about Rs 91,000 crore. Quite a few of them would like to spend substantial amount of money this year itself. All this will be available after March 31 when the year is over. For now, whatever calculations you are making, there is scope of correction.

Karan Thapar:You say that there is scope of correction in your calculations, let me put this because it is the second obvious question. On Monday, February 16 when you presented the interim Budget, you said that constitutional proprieties did not permit you to give a stimulus to the economy and yet eight days later, when you cut excise duties and service tax, that's precisely what you did. Would you now accept that giving a stimulus is more important that constitutional proprieties?

Pranab Mukherjee: No it is not that. You are making a basic mistake. What I stated in my observations is that I could have done much more but I could not prove because my proposals are to be backed by allocations of the resources. I did not impose any tax. What parliament granted, please understand this constitutional right.

Karan Thapar:I accept that but you cut taxes and you could have cut that earlier?

Pranab Mukherjee: Obviously, it has happened from the day one, when the Finance minister presents the financial proposals in the Budget, thereafter, he watches the market and responses which he receives from various stakeholders. After that, that is why you will notice always the fiscal proposals are corrected in the final amendment to the finance bill.

Karan Thapar:Maybe but this year was an exceptional year, did you have to wait and watch the market to correct you sir, did you not know on Monday itself that you were not doing enough, that you needed to know more?

Pranab Mukherjee: This is argument for argument sake. What I have followed exactly the same pattern, every finance minister does.

Karan Thapar: Except that this is an extraordinary year.

Pranab Mukherjee: I have not changed an iota of the direct taxes. I have not imposed any new taxes to mop up additional resources. That is the constitutional propriety. But the maneuverability which is being provided by the parliament to the finance minister to make adjustments throughout the year whether it is at the time of Budget, or post or pre-Budget, it is not very material.

Karan Thapar:I accept the point that you are making, but by having to wait for days you created, first of all a sense of concern in the country that you did not understand the seriousness of the problem and secondly, it made many people think that the measures that you took 5 or 6 days later was under pressure and not out of good will or understanding.

Pranab Mukherjee: Not at all. This is normal practice that every finance minister takes.

Karan Thapar:Let me put a second contradiction, this time not what you have done but a contradiction what the deputy chairman of the planning commission had said and the way facts have proved him wrong. They day after your interim Budget, he said to me in an interview that there was no need for further stimulus, that the government had already done enough. Now clearly, there is a need for stimulus, the rate of growth of the economy is slowing down, and it seems too many people that it is worse than what the government anticipated.

Pranab Mukherjee: No, it is not that. What he said was absolutely correct. He said that there may be some additional packages. He himself talked to me that there may be if possible, but if you find that if the packages are not backed by adequate resource allocation, then it will not have credibility. So, exactly, we did this. Don't try to find out that these are given here by taking it out of context.

Karan Thapar:Let me put to you the central concern. People look at the way, they perceive you to have contradicted yourself, people look at the way Montek Alhuwalia contradicted himself.

Pranab Mukherjee: It is not a question of contradiction. It is in someone's imagination. It is not real.

Karan Thapar:Let me finish my question. People even say that the government does not even show adequate appreciation of the extent of the economic crisis nor does it have a clear idea of how to respond, which is why it is going around in circles. It looks as if it is contradicting itself.

Pranab Mukherjee: Absolutely wrong. It is nobody's case. In a democratic society, there is divergence of views. Somebody may hold this view but we do not subscribe to that. Government took the appropriate steps at the appropriate time. I mentioned and replied to the debate. I mentioned in the main text of my speech that the government is continuing on. As and when situation would demand, we would respond. Situation demanded certain response, we have done it. But still it is unfolding. And we shall have to respond to that in the future.

Karan Thapar:The situation is unfolding and as it unfolds, it seems that the decline is worse than you anticipated, the figures are worse than you estimated. Are you in control?

Pranab Mukherjee: You are too much obsessed with one particular figure. Because everybody makes some estimates, that is why the system in the Budget is to give three figures--Budget estimates, revised estimates and actual. Because you do not understand, I am sorry to say that you are really poor in this matter because you are yet to expect what is going to happen in March. You are yet to expect what is going to happen in February. You are yet to know what has happened actually in December. All the figures that finance minister works with every year relate to December. Therefore, if you do not understand the constants in the situation, what can I do and what can I respond. If you want to argue a case in a particular way, you are absolutely free to do so but if you try to present a case in proper perspective to your viewers it is another story.

Karan Thapar:Let me put it to this way. You are arguing that Karan is wrong--it is not just my pre-conceived ideas but the point is the World Bank and the IMF publicly said that India would not achieve 7.1 percentage growth. They put the figure variously between 6.2 and 6.5.

Pranab Mukherjee: More than often it has happened. And half a dozen times, during the last 15 years, it has happened. It is nothing new.

Karan Thapar:But this time around the IMF is right and the government is wrong and when this was pointed out the government criticized the IMF.

Pranab Mukherjee:I am not going to say who is right and who is wrong. What I am saying is that there are different perceptions, there are different methodologies. While computing figures, we take certain things into account. What bank has their own standard or their own norm, therefore, many a times these types of studies are not comparable.

Karan Thapar:Clearly the figures are worse than what you expected, clearly the market is losing confidence in how the economy is performing ...

Pranab Mukherjee: I do not agree with your main contention that market is losing confidence, figures are wrong therefore, there is no question of responding to your questions. If your basic presumption is wrong, your conclusion is bound to be wrong.

Karan Thapar:Is the government in control of the economic situation or are you having to behave in a 'haddock' way, responding to things you didn't expect?

Pranab Mukherjee:What the situation demands, we are responding to these but as I mentioned, I am repeating that the situation is still unfolding. Till today, not only we, nobody in the world knows what is going to be the final outcome of this crisis. Therefore, we shall have to wait and watch but as situation unfolds itself, we shall have to respond to it adequately and appropriately.

Karan Thapar:I want to talk to you as a Foreign Minister. Suddenly it seems India is surrounded by neighbours in turmoil. There is crisis in Pakistan and Bangladesh, effective civil war in Sri Lanka, political paralysis in Nepal. It looks as if India is surrounded by a sea of insecurity and uncertainty. How concerned are you?

Pranab Mukherjee: I would not look at it totally negatively. There are certain positive developments also. You are talking of Nepal but at the same time sometime back, elections to the constituent assembly took place, one organisation which believed in violence, they gave up violence and joined the team of national multi-party political system.

Of course, there would be divergence of views in a democratic system, differences of opinion. In Pakistan also, election took place, elected government came to power after a long spell of army rule. In Sri Lanka, there is a fight against LTTE and the Sri Lankan armed forces. We are deeply concerned for the plight of civilian Tamil population which has been caught in the crossfire. But in other areas, there has been some democratic changes also. For instance, in Maldives. Therefore, it happens and our approach is to help our friends whenever they want it and to the extent possible for us. And to see peace, stability and development take place in our neighbours.

Karan Thapar:Let's talk of these countries individually one by one. First, Pakistan. You have said that Pakistan's response to India's terror dossier is a positive development, the foreign secretary in Colombo said, it was a welcome step. Has this therefore, lessened the tension and reduced the temperature between the two countries or does the sense of crisis remain unchanged?

Pranab Mukherjee:We have never raised the temperature. This is the phrase, I think British Foreign secretary used, and I told him that ‘no, I have not raised the temperature’. We have not stopped the communication line. But what we want is that the perpetrators of 26/11 have to be brought to justice, infrastructure available to the terrorist should be dismantled. And Pakistan authorities must fulfill their bilateral and internal commitments. And we are insisting on that.

Karan Thapar: In the meantime, every time President Zardari speaks in interviews or makes comments etc, he speaks things that are reassuring. As you judge him, do you see him as sincere or is this just rhetoric of words?

Pranab Mukherjee: He is a nice man. He is a gentleman, Gilani is a gentleman, Quereshi is a gentleman. But this is not the question of personalities; the question is that the incumbent government has responsibility. When we talk of, we talk of the incumbent government.

Karan Thapar: So you see Zardari as a nice man, a gentle man whom you can do business with. Therefore the onus is on him to prove that he will take the steps?

Pranab Mukherjee: Onus is on the Pakistani authorities to dismantle the infrastructural facilities available to the terrorists, to bring to justice the perpetrators of terrorism and to co-operate with India in achieving this objective.

The relationship between India and Pakistan is not the point of issue at this point of time. Point of issue is how to fight terrorism. It is not the question of improving our bi-lateral relations. Our bilateral relations are there, people to people contact is there.

Karan Thapar: Do you think Zardari is genuinely committed to fight against terrorism or do you think he is telling different things to different people, because he is trying to buy time and that the system in Pakistan won't respond.

Pranab Mukherjee: I would not like to comment on the system of Pakistan because it is for them to comment on this issue. But what I would like to say is that I believe in his sincerity because he himself is the victim of terror attacks. His wife, Benazir Bhutto fell as the victim of the senseless brutal terror attack.

Karan Thapar: So you mean that you believe in his sincerity?

Pranab Mukherjee: I believe in his desire to fight against terrorism but at the same time my belief is not adequate and it must be backed by the action taken by the government and the authorities of Pakistan.

Karan Thapar: Let me come to a different subject. Last week, as perhaps you know the former Pakistani Prime Minister Khurshid Kasuri gave me an interview where he revealed that during the time when general Musharraf was President, extensive progress had been made between India and Pakistan on the back channel, in fact he said that more progress was made than most people believed. Can you confirm on that?

Pranab Mukherjee: You know, what takes place in the back channel is never discussed in public. Otherwise there is no need of having a back channel at all. I cannot comment on what Quereshi told, but it is not our practice to make any comment, any observation on back channel.

Karan Thapar: Let me come to America. We have a new government, a new administration in America, recently Richard Holbrooke has repeated something that President Obama has said quite frequently that America would like to see some reduction in tension between India and Pakistan so that Pakistan can concentrate on its western border. How do you respond to such thinking?

Pranab Mukherjee: We have made it quite clear. When we had interactions with Mr Holbrooke or any other official coming from USA, we made it clear that the issue is not the relationship between India and Pakistan.

The issue is how to fight against terrorism. How to dismantle the infrastructural facilities that is available on Pakistan’s territory used by Pakistani elements to attack on India. How to bring the terrorists to justice. These are the issues and not the India and Pakistan relationship.

Karan Thapar: Did he understand that point?

Pranab Mukherjee: We conveyed it quite clearly and I don’t see why is there any reason to not understand it.

Karan Thapar: In his address to American people a few days ago, President Obama said that he would stop tax breaks to companies that ship jobs overseas. Many people believe that this could be a direct hit to Indian IT industry.

As you know that 60 per cent of India's IT property comes from America alone. Is this something that we have to accept or can the government persuade President Obama not to be protectionist?

Pranab Mukherjee: We cannot find country-specific solution to these kind of problems. The issue is that our IT industry will be affected with the impact of meltdown and financial crisis. It is not merely in USA but other parts also will be affected and we have to address the problem.

Karan Thapar: Is this an issue you can take up at the WTO because many people believe that what Obama intends is protectionist and therefore could be raised at the WTO?

Pranab Mukherjee: We are opposing protectionism, any form of protectionism, not only here, because that would be according to all assessments done. And Prime Minister Manmohan Singh while participating in G20 summit in last November made it quite clear.

Karan Thapar: So you could raise it in WTO?

Pranab Mukherjee: We are not only raising it but opposing it in every forum. Any attempt of protectionism.

Karan Thapar: And you are making it clear to President Obama that this is not the policy you agree with and that you think is justified?

Pranab Mukherjee: No question of finding any justice in it. Any kind of protectionism at this time should be avoided.

Karan Thapar: Mr Mukherjee, a pleasure speaking to you.



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