New Delhi: Finance minister Pranab Mukherjee is preparing to present what will be his fourth full-fledged budget, though he did present an interim budget in February ahead of the country’s 15th general election. Mukherjee, 73, spoke exclusively with CNBC TV18’s managing editor Udayan Mukherjee on the Indian economy as well as how the government will move swiftly to implement the Congress manifesto and how the focus of the budget will be on the so-called aam aadmi (common man). Edited excerpts.
How did it feel when you assumed office on Monday? Did you feel like a man burdened by expectations, as everyone is expecting so much from your government, or like a man raring to go?
There is a lot of expectation from the people, that there should be a stable government and the government will be able to implement its own programme. That’s why they have given 262 seats to the Congress and its pre-poll partners. Therefore, it is quite natural that there is expectation...the government...will be able to fulfil the commitments that have been made and also address issues, which concern the common man. I am fully aware of the problem. However, I am not new to this job. I am not talking of a quarter century ago, when I was FM (finance minister) and I delivered three consecutive budgets in the 1980s. Even during this period, when the PM (Prime Minister) became sick and after 26/11 when Mr. Chidambaram was shifted to the home ministry, the PM was looking after the finance ministry for some time. He asked me to look after the finance ministry. So, I am aware of the problems which have to be addressed. I mentioned them in my interim budget speech on 16 February.
Restoring balance: The finance minister, Pranab Mukherjee, says he has a priority for both growth and maintaining fiscal prudence. Harikrishna Katragadda / Mint
So the full budget will take care of all those concerns you articulated in your interim budget speech?
Most of these will have to be taken care of and addressed.
At this point, you have spent a couple of days in the ministry. Are you reasonably certain there will be a Union budget in the next couple of months?
I want to present the budget within the stipulated date; in fact, I have had discussions with my senior officers and colleagues and I have told them that I would not like to have a second vote on account. It is a normal practice to facilitate the members to have a little longer time and also to ensure that the parliamentary committee (has time) to scrutinize.
They assured you that they can put forth a budget by the end of July?
The officers are working very hard. The budget will be presented in the first week of July. And we will be able to pass it by the end of July, because 31 July is the deadline when the vote on account will come to an end.
You are not a newcomer to this job, but how much would you want to pack in the first budget?
I have identified the issues, the areas of concern. What I stated in my interim speech is that these will have to be addressed in the full budget. But...keep in mind that this government has been elected for five years. What is expected to be done in five years, you cannot expect me to do in one year.
But the expectation is higher..., because in the last three years you wanted to do a lot of things that the Left parties did not let you do. So, this is not a normal budget.
That is in the area of some economic reforms. And we will definitely try to see how best we can go ahead. But I would not like to go into the specifics, because I shall have to formulate my own views. The PM has made a general statement, you have seen it, that the broad objective is to bring back the economy on the...growth trajectory. Adverse effects of the global financial crisis on our growth may continue for a year or so, because the crisis is not yet over. The signs of recovery in Europe and North America are not yet visible. These things will have to be taken into account while forming our policy.
You spoke about the PM’s statement. How closely will Manmohan Singh be engaged in the formation of the first budget?
I am his finance minister. I am FM of the Prime Minister.
There is some talk that this time around some specific ministries such as divestment may come back in a separate form. Would that be acceptable to you? Like disinvestment may become a separate ministry from the finance ministry. Is that likely in your eyes?
Look, these are all speculations. Unless something takes place in concrete, how can I respond to you?
But is that something you are considering?
No, not at all. Because nothing is on the plate... Why should I indulge in speculation? That is the job of my friends in the media, not me.
When you presented your interim budget, you said that if the country needs it when the next budget is presented you will look into the case for a fresh fiscal stimulus. How do you assess economic conditions now and do you think there is need for another package?
There are certain sectors which have been badly hit by the global financial crisis: the export sectors, particularly textiles, leather, gems and jewellery. Their problems ought to be addressed. The IT sector has also been affected. The Indian economy is resilient and it has not done as badly as some of the other economies have done.
So far as economic stimulus is concerned, we responded immediately after the middle of September, then the first stimulus package was announced by the PM on 7 December and subsequently in January. And I announced the third one in my interim budget. Things have started improving. There is a good impact on (the economy) and naturally it will take some time. From 2 March, when the Code of Conduct was in operation, no new initiative could be taken by the government, as per the law and practice of the land. There are couple of weeks available to me. So, whatever is appropriate, I will take appropriate measures.
So you’re saying that, if required, you can do more stimulus?
I’m just saying that whatever the economy needs will be done.
As finance minister is the fiscal deficit a top priority for you or is growth a top priority?
I have priority for both growth and maintaining fiscal prudence. As for the year 2008- 2009, it is known the figures for the year are projected in the interim budget, and the fiscal deficit has gone beyond that. What is needed right now is stimulus to the growth but at the same time we cannot indulge in fiscal profligacy. We shall have to restore the balance. But it is difficult for me to say at what point of time and what will be the time span.
The government’s large borrowing programme also leads to hardening of interest rates. What is your view fundamentally on the interest rates?
If you require growth, you have to inject money into the economy and if the annual revenues are not adequate, you have to borrow. And at the same time you have to maintain a balance and borrow prudently. Striking a balance between competing needs is the job of FM, which I will have to do.
Now that you have a much stronger coalition at the Centre and you have the freedom to do many things that the Left did not let you do, do you think that the government will be able to garner much more by way of capital receipts to bridge the fiscal deficit such as auctioning spectrum for third-generation telecom services, disinvestment, etc.? Are those options opening up now?
Those are the details of the budget. I won’t say.
No, are those options opening up...
No, those are the details of the budget. I won’t say it.
How concerned are you about the state of infrastructure and how much of a focus would you accord that?
Infrastructure is to get adequate attention. I believe that massive investments in infrastructure would help us get back to the growth trajectory.
But specifically in terms of infrastructure, are you unhappy at the pace at which things have moved on roads, etc. over the last three-four years? Would you want to move at a much faster rate?
I would like to move at a faster rate.
Is there consensus within your party on many of the reforms which were not done in the last two or three years? Because there is one view that people inside the Congress do not have great conviction about many of the reforms.
In a democracy there are various views and that is the beauty of democracy. But when we arrive at the decision, we implement the decision. Before that there may be divergent views. In a democracy of this size and magnitude, you cannot expect uniformity of thinking.
Do you think that you can convince all your colleagues in the Congress to go ahead with the reforms at the pace at which you want to move ahead?
I am quite confident that I can convince my colleagues and all rational persons about what is needed to be done for the larger interest of the country. Everybody will agree to that.
But is the Congress party pro-foreign investment?
Whatever we have done, we have done as a Congressman: What I did in 1983 as the Congress finance minister and what Doctor saheb (Manmohan Singh) did in the early 1990s as Congress FM.
Would you concede that there are serious systemic flaws in the system of oil pricing which you need to look at as FM?
I will have to look at various issues, not just the oil sector.
Because it is a very important sector because of the kind of subsidies you are carrying in the budget. It is probably the most important issue. Would you try and resurrect that in the current budget?
What will be done in the form of a budget proposal will be known when the proposal is made.
Fine, I am not asking for the fine print...
I am not giving any hint. What is to be done as a budget proposal will be presented in the budget. What I can assure you is that whatever is needed for the betterment of the economy, as per our assessment and judgment, will be done.
Is your thrust going to be on social schemes, employment generation?
Of course. The common man is to be at the focus; the aam aadmi has to be the focal point. Why did we say in our manifesto that from the experiences that we gathered from the implementation of the National Employment Guarantee Act that we will improve it further? Why did we say that minimum wage will be increased to Rs100? That is because the aam aadmi is our focus.
You have spoken about growth picking up in India after October. What are you predicating or basing that hypothesis on?Is is hope or is there conviction in that?
No, I am hoping so and some indications, though not very clear; some indications are available.
The type of deterioration situation prevailing after the second half of last year has been reversed to some extent.
I know the manufacturing sector is not doing well...but I presume the growth projection for the year 2008-09 will be nearer to the assessment made by the Central Statistical Organization of around 7%; it many be a little less but it will be around that. Thus, if something drastic does not happen in the intervening period, things may start picking up from the month of October. I mention that month because by that time the prediction of monsoon would also be known.
Finally any thoughts on the Bharti-MTN deal which got inked Monday? Do you have any thoughts as FM about such a big cross-border deal?
It’s a welcome move... It has added a new dimension to our south-south cooperation, and I wish them all success.
So we will have a budget from you by the first week of July. Will we see a conservative Pranab Muherjee or an aggressive Pranab Mukherjee?
Let us see at that point of time.