•SHEKHAR GUPTA: At the finance ministry, you had to hit the ground running. Were you mentally prepared for the crisis situation?

I knew the situation would be very difficult. At least the management of finances would not be easy. At the same time, when I took over as Finance Minister in 1982, the financial situation was not very comfortable either. In December 1981, we entered into an extended funding facility with IMF—$5 billion borrowing. I think that was the single largest borrowing to any individual country in one component till then. Naturally, there were two views on it and there a great deal of criticism which continued for almost two years. So I am used to dealing with crises.

•SHEKHAR GUPTA: In today’s situation, you have the recession and just when we were getting out of it, the drought came. How do you compare today’s crisis with crises finance ministers faced earlier?

We are having problems. By the end of the year, there will be some inflationary pressure. It has already started. With the revival of the economy in Europe and North America, there will be more demand of oil. So there is an apprehension and the possibility that oil prices will go up, which will have its impact on us. The exact intensity of the drought is yet to be assessed because ultimately, it will be the net quantum of kharif rice production that will matter. But I am not unusually worried: 252 districts in 10 states have been declared drought affected. Of them, there are some districts which are not very important for crop production and particularly, kharif crop production. However, very important states like UP and Bihar, which produce kharif crops, have been affected. In Punjab and Haryana, I am told, the crops have been protected though at a very high cost as they had to buy power at a very high cost. Their yield is reasonably high so it can be accepted that we will have some relief. The total quantum of the shortfall will be decided only after the yield. As for water, up to now, 39 per cent of the 81 reservoirs are filling to capacity. Last year, it was 67 per cent. But if the catchments get rain in September, these deficiencies, to a considerable extent, can be made up, though it will not help the crops. Taking advantage of moisture, fodder and short duration crops can be planted.

... contd.