Nirmala Sitharaman: 'Prime Minister Modi Does Not Tolerate Gaming Of The System'

'Grassroots-level corruption, which disrupts the last-mile work, cannot be ignored in your enthusiasm and drive to get going to complete the project.'
'Like it was in MGNREGA, in some states, it is the case with the Jal Jeevan mission.'
'The last minute levels of corruption can ruin the intent of the project itself.'
'When you see that people can game a particular well-intended and well-crafted project, you need to correct that.'

The India-US trade deal, had it come a little earlier, would not have made the Union Budget any different, Finance Minister Nirmala Sitharaman tells Asit Ranjan Mishra, Vikas Dhoot, Nivedita Mookerji and A K Bhattacharya at her Parliament office.

• Part 1 of the Interview: Nirmala Sitharaman: 'Focus Of Budget Was To Keep Stable Growth Going'
• Part 2 of the Interview: 'I Don't Want To Let Down The Economy...'

The concluding part of the interview:

One thing that is bothering people is the mechanism of ensuring that the states and the central departments spend their money.The shortfalls that you are seeing are very significant in key schemes.
Is there an institutional mechanism needed to make sure that the states and the central ministries actually spent the money under, for example, the Jal Jeevan Mission, instead of it just being a disclosure of transparency?
You have moved to transparency, but is there any action needed to act on the information that people have now?

This doesn't recognise that there is one other issue: Grassroots-level corruption, which disrupts the last-mile work, cannot be ignored in your enthusiasm and drive to get going to complete the project.

Like it was in MGNREGA, in some states, it is the case with the Jal Jeevan mission.

The last minute levels of corruption can ruin the intent of the project itself.

You may lay the pipe but there is no water in the source from which it has to come.

So, in other words, therefore, when you see that people can game a particular well-intended and well-crafted project, you need to correct that.

Until I correct that, I can't just say that people might question that I am not spending the money, and I flush it there.

I'll correct it and give it to you. Haven't we corrected MGNREGA?

Have we thrown the baby with the bathwater... You may not like the name VB-G RAM G, but haven't I provided Rs 95,000 crore for it? Haven't I also, recognising that the system was being gamed, still because you could question me, given Rs 30,000 crore there (MGNREGA) as well.

Within one year, over Rs 120,000 crore for the same intent -- in the name of MGNREGA and the VB-G RAM G.

We have corrected the system and we have put money. Therefore, that cause gets served.

But till then, how much water has flown under the bridge? There were instances of totally gaming the system and CAG came up with the report.

The state team and central team went together to those villages where this was happening and the state team could not disprove the point.

Then it was clearly laid out that you will give that money back to the system, which is the government system.

It has to go to the exchequer, then you get it back for the right claimants.

There was cheating at that as well... money was taken from the treasury and put back.

You cheated this system and gave that public money to ineligible fellows.

When we are saying, retrieve that money and put it back and then take the money again for the eligible ones, you're taking it from the public exchequer again and then putting it back, and not retrieving it from them.

The brazenness with which they are gaming the system... So that has been sorted out now.

The reason for un-utilisation in some of these major well-intended schemes are these sorts of things.

I can't repeatedly talk about this publicly but we have to correct it. VB-G RAM G is one classic example of where Prime Minister Modi does not tolerate this kind of gaming of the system.

Where money has to go to the people, he has given it to you. He has also given it to those people and said take your bills and go away. But now, the system should be clean.

Am I looking at only the big industries? No'

In the Budget, you mentioned about upgrading 200 legacy industrial clusters. Have they been identified, and what is the nature of upgradation that you have in mind?

There are several things we have to do there and I'm working with the MSME ministry.

When I say I have to have manufacturing as one of the pillars which will give me sustained growth, am I looking at only the big industries? No.

One side of the coin is through PLI, you look at the scaling up prospects, look at those industries where intense labour engagement happens, those which have export possibility.

And then through PLI support also, semiconductors, phone manufacturing, electronics, gems and jewellery, textiles.

But the other side of the coin is the matter of fact that 40 per cent of your export happens from MSMEs.

That's why we said we'll make champions out of the medium-sized industry, the top end of the lower half.

Because the lower half is small, you can't really scale them up.

The medium ones -- even if they have every possibility to grow, they don't want to grow because they fear losing out on these MSME benefits.

That is why we have changed the norms, you would still be with an MSME, but if you want support from us, in the form of equity support, liquidity support, professional support, we will provide it.

But with that said and done, maybe those getting this support may all be new.

What happens to the legacy ones, to those MSME units which have been there for 30, 40 years now? When you study that problem, you get to know that most of these clusters, whether in Tiruppur, in Surat, in Jalandhar, in any other place, are all bursting at the seams.

No space to grow, no policy framework which allows them to grow vertically, or no additional infrastructure or capital infused for machinery upgradation, no capital infused for better technology to be brought in, or training.

The higher limits for AIF investments from overseas persons is being seen as a significant reform to boost capital inflows.
There's also a challenge of mobilising the domestic pool of savings, especially from high-net worth individuals who are using the portfolio route to invest abroad and perhaps, crimping the savings available for domestic investments.
Does that concern you and how do we create vehicles to bring those savings to domestic ventures and projects?

I don't think there's one possible answer. I am not encouraging them going out but it doesn't actually crimp the available investible funds.

Going out has some benefits but yes, bringing a portion of that back for investing in India is happening and significantly happening.

So I am not saying let it be like that. We will have to attract them... there is also now a tendency for them to set up under the IFSCA.

People are coming there because it has its own benefits and nothing stops them from investing in India aside from there, rather than a similar facility elsewhere.

So that's also become one of the ways in which money comes back into India, and from there, they can still get the kind of returns that they want by investing in other destinations.

The recent spate of mergers and acquisitions halted somewhat perhaps in October, but reviving again, and also, the increased interest in IPOs -- there is a lot of interest in our own investors coming back in search of partners.

In between, there was this talk that legacy business houses and their heirs don't want to continue with that, they are putting it somewhere and earning returns.

You can't blame them, it's their money.

But yet, India wants to have the benefit of more investments, more capacities being built, more jobs being created and more output.

So now, what is happening is with the renewed interest in IPOs, many of them are coming for partnering with others.

Maybe the priorities of the core sectors that their families have been engaged in, is shifting somehow.

And in shifting, they are also looking at partners who have got the expertise.

So I can see that happening. In fact, many of the funds, trusts, home offices and others are probably looking for partners in newer sectors in which they want to start afresh.

You are hopeful on this front?

I see some of it happening already.

On the PM Internship scheme, the allocation has gone down... What do you think has gone wrong?

Allocation has not gone down. We are doing it for five years and have done some pilots. So the allocation is only proportional to the pilot.

Now we are taking a note to the Cabinet for the entire project to be launched. So that will be different... Pilots can be more or less, depending on the lessons learnt.

What are the learnings from the pilot?

The learnings -- some of them thought it was too long a course, some wanted more money, some of them wanted to be in a particular sector, but that sector did not make an offer to them.

Some wanted to be out of their state, some others who saw people get employment in the company where they did internship and felt - 'Oh, I should have taken a call'... and you also had people who had come from districts who felt that language was a barrier.

So there are several learnings. Not all of them may be incorporated in the scheme, but some will.

The Supreme Court's judgment on the Tiger Global case. Is there a need to clear the air to ensure it doesn't become a matter of uncertainty?

No, I honour every word of the DTAA, every word of the General Anti Avoidance Rules (GAAR) on tax avoidance.

But even for that one occasional case where there is an abuse, I should look the other way, thinking that it might affect the investor mood, may not be right.

Where there is an abuse, a legal recourse is there, the judiciary at various levels have looked into it and agreed that there was an abuse, that cannot be interpreted as me violating the DTAA or violating the GAAR norms.

abuse, it is my duty to make sure abuse is recognised, meaning noticed and treated legal.

I don't think this particular case you're referring to, has anything more than that.

'There was an abuse, the abuse was established in the reading'

Some people are saying that this was the apex court's retrospective reading of a law. The law is fine and not retrospective by nature like the Vodafone tax in 2012.
This was the law which is prospective but the Supreme Court read it with retrospective effect.
So it was a reading of the law which they're questioning, not the law itself -- is a perception.

I am not sure the perception is right.

When did GAAR come into force? When was the shares bought? When was it sold? When was this actual selling happening? And that residence certificate of somebody from Singapore, and is that Mauritius company all right? Therefore, you had gaps in different parts of this entire process. It's a case.

It's not that the relationship with the countries involved. It's that one particular case where there was an abuse, the abuse was established in the reading.

So you don't think it will set a precedent?

No. That is why I'm saying it is a case where there was an abuse, the law was read before the court, reread before the court, argued with evidences, and therefore, it said, 'Yes, this is an abuse of the law.

The judgment has not set the precedent in terms of interpreting the law. The law was interpreted and the abuse was called out. That's all.

You have presented eight full Budgets and one interim one. Do you think a different approach is required in Budget making, any kind of innovation, any new thought that you want to bring into the process?

No, I should first be open minded about receiving any new thought. But there are two things. There can be lot of openness about it, lot of transparency about the process, I'm not talking about the document.

That is why we are engaging with a lot of people, putting it out on web sites saying 'give your inputs'.

Even in WhatsApp, if you send a message, we will have a look at it. We're going to colleges...

I invited the Delhi School of Economics students. That is the institution in Delhi specifically for economics, so reputed, you should have a role in budget making.

So I make them come every year. There was this youth dialogue that Prime Minister Narendra Modi in which a lot of ideas were generated.

Some of them were taken by us in the Budget.

And post the Budget, I said I'm not going and sitting and doing interviews.

People have heard the Budget. That day, I will engage with all students from all over India.

We, in fact, brought 33 students from all over India to sit in Parliament, watch the Budget, and post the Budget in the evening, I went and sat with them.

That was a refreshing engagement. It was so it is a lot of open process, even as it is.

But how much ever I say about openness, transparency in the process, I am repeating, I am committed to transparency, but not on the document...

I can't obviously put Part B out to be transparent. It can lead to even a 24 hour-speculation. That speculation can also be sometimes used.

So I am not sure if much can be done about that usual sanctity of holding it closer to your chest till you say it in Parliament, as of now... unless there is an era where people openly say: "Tax me".

• Union Budget 2026

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