Prime Minister Manmohan Singh spoke about the Union Budget in an exclusive interview with national television broadcaster Doordarshan. Edited excerpts:
On fiscal consolidation, the much-awaited rollback of stimulus measures was announced in this Budget. There were expectations that this rollback would be calibrated and selective. But what we saw was…an across-the-board increase in the Central excise duty from 8% to 10%, and there are obvious fears in certain quarters that prices will go up. Do you fear this will stoke inflation?
You must look at the total picture emerging from the Budget. The net revenue gain for the finance minister is only Rs20,000 crore. In an economy as large as India, this resource mobilization 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...that you cannot have all things together.
Coming to the question of the deficit. A fiscal deficit of 5.5% of GDP (gross domestic product) roughly presupposes a nominal growth of 14% or so with an inflation rate that can be around 5.5% or 6% next year. Do you envisage that the growth projections have been underestimated?
Well, I have not looked into the technicalities of the Budget. Overall my impression is that the finance minister has…the right mix of estimating the growth requirements and, at the same time, dealing with a certain amount of moderation on the price front.
Middle path: Singh says there is no harm in postponing the introduction of the direct tax code till apprehensions about it are addressed. Kamal Singh / PTI
Because the duties on petroleum and diesel products have also been raised...there could be fears on this front that…they’ve been raised at an inappropriate time.
I think the finance minister has mentioned that these duties were reduced during a period when the petroleum prices had gone up to $112 (around Rs5,175) per barrel. Now the prices...are much lower. Therefore, the economy has the capacity to absorb this order of adjustment in excise and customs duties without generating a wholesale inflationary spiral.
There is one view that the key reform measures have been either postponed or skirted. For example, the goods and services tax (GST) has been postponed by a full year, and the direct tax code (DTC) again by one year…
Let me say that our direct taxes, on the whole, do not present a problem. We will need some simplification. The DTC must be a way to control the growth impulses... But the DTC that was circulated…has aroused certain apprehensions in the mind of the business community. Those are being looked into, and I think nothing is lost by postponing the introduction of the DTC till such time that we are satisfied that all the apprehensions that have been expressed by investors and the business community have been taken care of. At the same time, the GST requires a consensus. The states have to be on board. Until the states are on board, we cannot move very far in the direction of having a GST. I sincerely hope, during this year, we will work to evolve that consensus.
Even in the question of capping the debt at 68% mooted by the Finance Commission, we are now seeing the formation of a committee going into it…
The finance minister has committed our government towards capping the fiscal deficit of the Centre and the states at 68% by 2014-15. This is the recommendation of the Finance Commission.
The Finance Commission talked about the 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?
I think the finance minister has mentioned a fourfold strategy for agricultural growth. The fact is that, despite negative growth rate (in agricultural production), the economy this year will grow at least by 7.2%. In my view, it could grow at 7.5%. That’s a tribute to the resilience of the economy, the revival of the manufacturing sector, the revival of the export momentum. All these are positive factors.
As far as agriculture is concerned, the finance minister has zeroed in on a fourfold strategy of doing everything possible to increase the productivity of agriculture in eastern Indian states, to strengthen the growth impulses in dryland agriculture. He has mentioned that 60,000 villages… will be taken up for increased production, particularly for oilseeds and pulses. He has also mentioned the effort to simultaneously improve food-processing activities; from 10 food parks taken up earlier, we will add to the number by five.
So he has mentioned a fourfold strategy which, if implemented, should make considerable difference.
One final question. Out of maximum marks of 10, how many marks would this finance minister get on this Budget?
Oh, the finance minister has done an exceedingly good job. He is one of our most experienced ministers, and he is one of our seniormost party members. I compliment him for a job well done.
You wouldn’t like to give a number?
I don’t believe in giving numbers. That’s for the public at large.