Days after presenting the Interim Budget in Parliament, followed by another stimulus to the economy, Finance Minister Pranab Mukherjee spoke to Karan Thapar for CNN-IBN’s Devil’s Advocate. The interview will be telecast on March 1 at 8:30 pm. Edited excerpts:
On the basis of the advanced estimates, the government said that growth in the year ending March 31, 2009, would be 7.1 per cent. But on Friday, we discovered that the third quarter growth is just 5.3 per cent and growth between April and December is just 6.9 per cent. So, can you accept that your growth estimates are clearly wrong?
All these are estimates. Of course, between 6.9 per cent and 7.1 per cent, there is not much of a difference. But I do hope that when final figures will be available, it would be around 7 per cent.
So, even though Q3 growth is 5.3 per cent and many people believe Q4 could be worse, you are still saying it will be around 7 per cent?
Around that much.
People outside are saying the growth for this year may not even be 6.5 per cent.
This is all speculation. Nobody knows how the economy will respond to the stimulus package, the various steps that we have taken in the remaining period of the fiscal. All these are yet to be seen. For instance, revival of the steel and cement industries has started. For housing, we have made adequate allocations.
States have been provided with funds. All the states taken together have a good cash surplus of about Rs 91,000 crore. Quite a few of them would like to spend substantial amount of money this year itself. All this will be available after March 31, when the year is over. For now, whatever calculations you are making, there is scope for correction.
On February 16, when you presented the Interim Budget, you said that constitutional propriety did not permit you to give a stimulus to the economy and yet eight days later, when you cut excise duties and service tax, that’s precisely what you did. Would you now accept the fact that giving a stimulus is more important than constitutional propriety?
It is not that. You are making a basic mistake. What I stated in my observations is that I could have done much more but I could not because my proposals have to be backed by allocation of resources. I did not impose any tax.
But you could have cut taxes earlier?
After the finance minister presents the financial proposals in the Budget, he watches the market and responses, which he receives from various stakeholders. That is why you will notice that the fiscal proposals are corrected in the final amendment to the Finance Bill.
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But this year was an exceptional year. Did you have to wait and watch the market to correct you? Did you not know on Monday itself that you were not doing enough?
This is argument for argument’s sake. I have followed the pattern every finance minister does.
Except that this is an extraordinary year.
I have not changed an iota of the direct taxes. I have not imposed any new tax to mop up additional resources. That is constitutional propriety. But there is maneuverability which is being provided by Parliament to the finance minister to make adjustments throughout the year.
By having to wait for days, you created first a sense of concern in the country that you did not understand the seriousness of the problem and secondly, it made many people think that the measures that you took five or six days later were under pressure and not out of goodwill or understanding?
Not at all. This is normal practice that every finance minister follows. The day after your interim Budget, Planning Commission Deputy Chairman Montek Singh Ahluwalia said to me in an interview that there was no need for further stimulus, that the government had already done enough. Now clearly, there is a need for stimulus?
No, it is not that. What he said was absolutely correct. He said that there may be some additional packages. He himself talked to me, but if you find that the packages are not backed by adequate resources, then it will not have credibility.
People even say that the government does not even show adequate appreciation of the extent of the economic crisis nor does it have a clear idea of how to respond, which is why it is going around in circles. It looks as if it is contradicting itself.
Absolutely wrong. In a democratic society, there is divergence of views. Somebody may hold this view but we do not subscribe to that. The government took the appropriate steps at the appropriate time. As and when the situation will demand, we will respond. The situation is still unfolding.
As the situation unfolds, it seems that the decline is worse than you anticipated, the figures are worse than you estimated. Are you in control?
You are too obsessed with one particular figure. That is why the system in the Budget is to give three figures: Budget estimates, revised estimates and final estimates. You are yet to know what is going to happen in March. You are yet to know what happened in December.
But the World Bank and the IMF publicly said that India would not achieve 7.1 per cent growth. They have put the figure variously between 6.2 and 6.5 per cent.
I am not going to say who is right and who is wrong. What I am saying is that there are different perceptions, there are different methodologies. While computing figures, we take certain things into account. Therefore, many a time these studies are not comparable.
Clearly, the figures are worse than you expected. Clearly, the market is losing confidence on how the economy is performing.
I do not agree that the market is losing confidence.
Is the government in control of the economic situation or are you having to behave in an ad hoc way?
What the situation demands, we are responding to it. But, I repeat, the situation is still unfolding. Till today, not only us, nobody in the world knows what is going to be the final outcome. Therefore, as the situation unfolds itself, we shall have to respond to it adequately and appropriately.