How’s the reaction to your budget?
I think I tried to listen to all the major demands. And yes, I’m happy with the budget.
So you think you made a perfect budget...
What is perfection? If I’d addressed only the demands of business, industry, trade and capital markets, the media would’ve been satisfied. But to say that we’ve learnt nothing (of the rest of India) is a damaging indictment of our ability to learn. Then we’ll meet the same fate as the previous government. The Congress has been out of power for eight years, I’ve been out of power for six. We are, I am, older now and, I’d like to think, wiser. There’s a whole India out there crying for attention, how can we neglect them? The BJP paid a heavy price for neglecting them. What we’ve done is the right thing. Pay attention to rural India and then pay attention to the reforms tasks—we’ve done both.
Will you cut the turnover tax? After all, it’s a tax on demand.
Let me put it on record, the turnover tax or the transaction tax was suggested to me by the capital markets. Nobody can deny that. I have made a proposal. It’s not law today, it becomes one only when the Finance Bill is passed. It’s a direct tax, not like excise and customs which take immediate effect. So they can suggest change. But the premise is correct—it’s a tax on transaction, rather than capital gains. There’s a long list of countries which levy it and at a much higher rate too. But certainly I’ll meet them (the brokers) when they come to me with a request.
You said you’ve been faithful to the CMP. But the Left don’t like the FDI cap hike and disinvestment.
I didn’t say I’ve been blindly faithful. But is there anything in the budget that’s opposed to the CMP? It’s only after very careful consideration that we’ve taken the decision to hike the sectoral caps in FDI. In telecom, 74 per cent of our companies are FDI-owned in a non-transparent manner. We’ve just brought transparency to the state of affairs. Take insurance. What is the difference between 26 per cent and 49 per cent? I’m using the headroom available to attract FDI. If airports can get 49, why not civil aviation? The points of inflaction are 0, 25 and 51. After you cross 25, it makes no difference where you are till 49.
Will the Left understand this?
Oh, we’ll explain, surely they’ll understand.
The disinvestment ministry returns through the backdoor...
We’ve just created a board. The disinvestment ministry under the NDA had made it a dogma--disinvestment for the sake of disinvestment. I set up the disinvestment commission in 1997 to advise on restructuring the PSUs, in some cases perhaps by selloff. While being faithful to the CMP, what we’re now saying (to the board) is that look at all other companies except navaratnas and tell us which ones would be profitable on a sustained basis in an open, competitive environment. Should we recontsruct them, disinvest them, close them down, or sell them?
You’ll not disinvest the profit-making ones?
That’s it. The companies that are profitable on a sustained basis, the board will not make any recommendation.
Why are you doing the NTPC IPO then?
I’m not doing anything. The navaratna is autonomously going in for an IPO to raise resources which the CMP allows. So I must seize the opportunity and see that I get some value for my holding which has appreciated.
You’ve taken 1.4 crore people out of the tax net...
I’ve not taken them out. I’ve just said that you will please file your returns but not pay tax. That’s been a universal demand.
...When you should’ve expanded the tax base. Instead, the same set of people are now burdened with the cess...
The tax base has widened since I cut taxes, from 1.2 crore to 3.4 crore. And it’ll continue to widen through better tax administration. But I can’t do comprehensive tax reform unless I have the Kelkar task force report. He’ll have to consider the budget figures and prepare a roadmap. He’ll give it in a few days.
The budget speech says that next year, you’ll do tax reforms.
No. I have said once these reports come to me, I’ll certainly examine them. Meanwhile, I hope compliance improves. Why do you and I pay more tax? Because somebody else out there is not paying his? If everybody pays tax, rates will come down.
You’ve given so many exemptions, isn’t it going against the spirit of the Kelkar committee?
I have only extended the exemptions in infrastructure—power transmission, distribution. If we have to be the auto parts hub, why shouldn’t R&D in automobiles be notified in the same manner? There’s no such thing as a no-exemption regime, that’s an ideal, utopian world. There’re some items that deserve to be exempted. R&D is one area. We have to identify a few such areas, all other exemptions can go hand and hand with lower rates. You cannot look at rates and exemptions in isolation.
You expect 25 per cent rise in revenues, that’s a dream budget.
All of you have forgotten there was an interim budget. I haven’t heard anybody questioning those figures. All I’ve done is taken those figures, then taken the historical growth rates, the buoyancy and added the additional resource mobilisation, the cess and the recovery of arrears.
The interim figures were criticised too...
Well, the bjp hasn’t questioned my figures.
Can the buoyancy be sustained? What happens to the deficit figures if growth is not even six per cent?
Tax revenue buoyancy is not exactly related to GDP growth, but to sectors doing well. So even if the GDP growth is low, the revenue can come from those sectors. We’ll see what happens. I’ll cut back on some non-productive expenditure. But what has happened now for me not to be optimistic?
There’s disturbing news on the monsoon.
It’ll be delayed a bit, but that won’t affect industry. The met projections say it’s 100-102 per cent of normal. My assumption is agriculture will do reasonably well and the buoyancy in industry and services will continue.
And you don’t see any inflationary pressure...
We’re doing a market stabilisation fund. We’re sucking up liquidity. Demand will increase because of what we’ve done in agriculture, you just watch the situation. We’ve asked banks to lend Rs 25,000-30,000 crore, that will stimulate production.Agriculture has a lot of absorptive capacity. Only 40 per cent of farmers are getting institutional credit.
So you’re not expecting instant returns.
We should look at development of rural economy and agriculture in the long term. I’m expecting a pickup in investment—both public and credit-enabled private investment. The investment drought ended last year. We need to encourage that and what better signal than setting up an investment commission?
Is this the big idea in your budget?
The ambitious programme to restore all water bodies in 7-10 years, that’s the biggest idea. My most ambitious scheme. Then the national horticulture mission, investment commission, infrastructure. In infrastructure, on a callable basis, we have Rs 40,000 crore lined up. Set up a hotel, build a port, do hospitality. For people with ideas, there’ll be no lack of money.
