Prime Minister Manmohan Singh discusses Union Budget presented by Finance Minister Pranab Mukherjee in the Parliament on Friday with Business Standard. Excerpts:
What do you see as the big ideas behind the Budget?
First, to accelerate the tempo of growth and return the economy back to 9 per cent growth of the last three years.
Second, to bring about a transformation in our economy whereby the commitment to the people of our party of working for inclusive growth can be given concrete content.
Third, the Budget also seeks to achieve a growth momentum while simultaneously strengthening the impulses towards fiscal consolidation.
These three imperatives require a delicate balance and the finance minister has done an exceedingly good job in achieving this.
On the question of fiscal consolidation, the much-awaited roll-back of the stimulus measures was announced in the Budget. There were expectations that this roll-back would be either calibrated or selective. But we saw an across-the-board increase in central excise duty from 8 to 10 per cent and there are obvious fears in certain quarters that prices will go up. Do you see this stoking inflation?
You must look at the total picture emerging from the Budget. The net revenue gain for the finance minister is only Rs 20,500 crore (Rs 205 billion).
In an economy as large as India , this resource mobilisation effort, on balance, should not trigger any inflationary expectations. At the same time, it gives a much-needed signal.
The finance minister has not gone back to the pre-stimulus excise duty rates. He has still exercised moderation while signalling to the economy that you cannot have all things together.
A fiscal deficit of 5.5 per cent of gross domestic product roughly presupposes nominal growth of 14 per cent or so with an inflation rate that can be 5.5 or 6 per cent next year. Do you envisage that the growth projection has been underestimated?
I have not looked into the technicalities of the Budget. My overall impression is that the finance minister has achieved the right mix of estimating the growth requirements and building in it a certain amount of moderation on the price front.
Duties on petroleum and diesel products have also been raised, so there could be fears that petrol and diesel prices will also be raised at the appropriate time.
The finance minister has mentioned that these duties were reduced when petroleum prices went up to $112 per barrel.
Now petroleum prices are much lower, so the economy has the capacity to absorb this sort of adjustment in excise and customs duties without generating a wholesale inflationary spiral.
There is one view that the key reforms have been either postponed or skirted. For example, the goods and services tax has been postponed by a full year, direct taxes, again by one year. . .
Direct taxes on the whole do not present a problem — we only need some simplification.
The Direct Taxes Code must be a source of strengthening growth impulses, the dynamic impulses, but it has raised certain apprehensions in the minds of the business community.
Those are being looked into but nothing is lost by postponing the production of the Direct Taxes Code till such time as we are satisfied that all the apprehensions of the business community are taken care of.
At the same time, the goods and services tax requires consensus in the country, the states have to be on board and until this happens we cannot move very far towards having a Goods and Services tax. I sincerely hope we will work towards a consensus during this year.
Even the question of capping the debt at 68 per cent as recommended by the Finance Commission, we are now seeing the formation of the committee that will go into it…
The finance minister has committed our government to work towards capping the fiscal deficit of the Centre and states at 68 per cent by 2014-15. This is the recommendation of the Finance Commission so we are endorsing it and that has been taken into account.
The finance minister talked about the growth momentum in the economy and said that despite poor performance on the agricultural front, the economy has bounced back. What are the key provisions you think will give impetus to agriculture in this Budget?
The fact that despite a negative growth rate, the economy this year will grow at least by 7.2 per cent — that’s a tribute to the resilience of the economy.
The revival of the manufacturing sector, of export momentum, all these are positive factors.
As far as agriculture is concerned, the finance minister has zeroed in on a four-fold strategy of doing everything possible to increase agricultural productivity in the eastern states and to strengthen the growth in pulses in dryland agriculture, he has mentioned 60,000 villages that will be taken up for increased production.
He also mentioned efforts to improve food-processing activities; from 10 food parks that we have taken up, we will add to this number with another five.
If these are implemented, it should make considerable difference.
Out of a maximum marks of 10, how much would you give the finance minister for this Budget?
The finance minister has done an exceedingly good job. He is one of our most experienced ministers. He is one of our senior-most party members.
I compliment him on a job well done. I don’t believe in putting a number to it, that’s for the public to decide.