'We have done nothing to hurt the growth story'

BUDGET & THE ECONOMY/ FINANCE MINISTER'S PRESS CONFERENCE

On a scale of one to five, I can't pick a number above five! And if I had to rate it on a scale of one to ten, I wouldn't be able to pick a number above ten!

On how this Budget compares with the 1997 "Dream Budget"

Every Budget takes place in a political and economic context.... In 1997, one dreamt a different kind of dream.

In that year, we wanted to tell the world that we were ready to join it and were willing to accept the responsibility of being a rising economic power. In 2007, we want to tell Indians that they are a part of the growth process.

On inflation

If you see the Budget speech, paragraph 8A about inflation was added this morning to take in the latest developments. ...Inflation can be fought on three fronts.

The first is on the fiscal side, such as cutting taxes and duties, which I have announced in Part B. The second is monetary, which the Reserve Bank has done by raising the repo rate four times and cutting the cash credit ratio four times last year. The third is on the supply side. India must produce enough food "� wheat, rice, pulses, sugarcane, edible oils "� to feed itself.

The surest way to increase supply is to raise production and productivity in agriculture, and that is what I have provided for in the Budget ... There is no such thing as a right rate of inflation.

Once upon a time we were tolerating inflation of 10 and 12 per cent and once upon a time there was inflation of 22 per cent. Please remember 1979 and 1974. But today the tolerance level of the people of India for inflation appears to be 4.5-5 per cent and therefore every endeavour is being made to moderate inflation at that tolerance level.

On the UPA's performance on inflation management

In 1998-99, for 11 weeks inflation was well above 6 per cent. In 1999-2000, it was well above 6 per cent for 48 of the 52 weeks "� in fact, it was above 7 per cent for 22 weeks and above 8 per cent for 12 weeks in that year.

In May-June 2004, when the UPA government came to power, inflation crossed 6 per cent, went up to 8 per cent and we moderated it to 3.8 per cent. So, the government has moderated inflation in the past and can do it again.

What is the nominal GDP growth projected for 2005-06?

It is 12 per cent for 2005-06. If you deduct the rate of inflation from this, you will get the real GDP growth rate.

On bringing employee stock option schemes (ESOPs) under the Fringe Benefit Tax (FBT)

First, I am glad everyone agrees that ESOPs are a fringe benefit. It is usually given by companies to executives at the very top, but in the US, many companies are moving away from it.

What we are saying is that we will tax ESOPs only when the option is exercised and only the difference between the price and the cost. So the amount we expect to get from ESOPs can't be quantified. But since it is a fringe benefit, it must be taxed.

What prompted you to tax cash withdrawal of Rs 10,000 per day?

This is not intended to be a revenue-generating measure. This is an anti-tax evasion measure. Large amounts of cash are withdrawn for no purpose and these disappear into a black hole. The idea is that on every withdrawal of Rs 10,000 you pay a small tax of Rs 10.

A lot of people are not complaining about the purpose of the tax but the tax rate. I am surprised that such a small part of the whole Budget has come in for so much criticism. Nobody is being penalised through this measure, but I will go by what Parliament decides on this.

You have projected a 21 per cent growth in tax collections despite the slippages in excise and corporation taxes in the current year.

We are on target in three of the five tax categories. On income tax, we have got much more than the target while on service tax we are on target.

We will fall short in corporation tax and excise duty, since banks and petroleum companies have paid lower tax this year. My main worry is on excise. Excise collection is growing at a moderate rate, partially because exports, which are growing at 20-25 per cent, get excise credit.

Our view is that the tax projection is quite reasonable. It is better to set the bar a little higher for the revenue department. Detailed calculations have gone into the tax projections and we will do our best to achieve it.