Prime Minister Manmohan Singh tells T N Ninan
Prime Minister, I would like to begin by asking how this Budget addresses current economic conditions, specifically inflation and sustaining rapid growth.
Well, Mr Ninan, this Budget meets all the challenges that our economy and our polity faces in the next fiscal year. We need to sustain a high rate of growth and, therefore, this Budget builds upon the good performance of the current fiscal year’s 8.6 per cent growth rate to a projected 9 per cent growth rate, for which adequate provisions have been made, particularly in the area of infrastructure and in the social sector, plus agricultural development.
It is certainly necessary to curb inflationary expectations, for which it is essential that there should be a path of fiscal consolidation. The finance minister has done a commendable job by planning to reduce the fiscal deficit and revenue deficit below the figures he himself had projected in the Budget estimates.
What he has done by way of social sector spending, what he has done by way of encouraging investment in agriculture and the tax concessions that he has given, I think this is a Budget that matches the challenges that our economy faces — sustained growth, equitable growth, inclusive growth, plus a determined effort to curb inflationary expectations.
The finance minister has not raised any additional taxes, and yet he said tax revenue is up 25 per cent. Is this achieved just through rapid growth? And, therefore, can you continue to reduce the deficit by achieving rapid growth?
Rapid growth is certainly one factor. But equally important is greater tax compliance, and for that moderate rates and simplified systems also are essential. And the finance minister has walked on both these legs.
The finance minister has announced some adjustments in I-T rates at the bottom levels and specifically for senior citizens. But there were cries in the House about women, for whom there was no action, it was said. And also, for those further up the income ladder, who also suffered inflation, there is no action for them. How do you react to that?
You can’t please all people. And the finance minister has done as good a job as was possible. The fact that he has increased the exemption limit for people at the lowest rung of the ladder from Rs 1.6 lakh to Rs 1.8 lakh will benefit all men and women; for older citizens, he has done much more.
The expectation was that there would be some kind of amnesty scheme to try and bring in black money to invest in infrastructure. That has not happened. Was it at all something that the government considered?
Well, amnesty schemes have been implemented in the past. I don’t think they have succeeded in providing a permanent cure for black money. We need systems reform in a holistic manner to deal with this menace.
More From This Section
The stock market was fairly optimistic through the last couple of hours. In fact, even before the speech began and then it kept climbing. Yet, there is nothing really for investors in the Budget. How do you read this from the perspective of the capital market?
He has done quite a lot to encourage foreign direct investment and foreign portfolio investment. He has reduced the surcharge from 7.5 per cent to 5 per cent. I think, the signals are that this is a government that is reform oriented. He has promised that he will come with legislation with regard to insurance, with regard to pension funds. In totality, if these promises are converted into solid Acts of Parliament, they will provide a boost to the capital market as well as to corporate sentiment all around.
There is some frustration that the same promises are made from one year to the next. Whether it is the Direct Taxes Code, the goods & services tax (GST) or some of the Bills on debt management. That from year to year, the same issues are still in process and they are not actually completed.
As far as the Direct Taxes Code is concerned, that is very much on the cards. It will, I think, become a reality around April 1, 2012. Now, as far as the others, much depends on what we can push through Parliament. There is no lack of effort on the part of the government, and I am confident that although there are some difficulties with regard to GST -- some states are not on board -- I am confident that we will persevere and ultimately succeed.
One area of concern has been that interest rates have been climbing. Now, in this Budget, if I understand the numbers correctly, the government’s borrowing programme will not increase next year in relation to this year. So, if the government’s borrowing programme is static, would you then expect interest rates to moderate?
That is certainly one factor. The government cannot be a claimant on the nation’s savings pool. So, that will help at the margin. But there are many other factors. For example, what happens to inflation? That also has to be taken into account.
There was an expectation that the finance minister would raise excise and service taxes from 10 per cent back to the 12-per cent level that prevailed before the recession. And he has not done that. If he had done that, the deficit would have come down further. So, what were the calculations that went into keeping the taxes unchanged?
Moderation in taxation on balance is a good thing to play with. And if you are moving towards a GST, I think it is also necessary to have that end product in mind. I think the finance minister thought it through; both customs and excise duties’ peak rates have been kept at 10 per cent. I think that’s the right way to go because we cannot be too certain that everything will work, that the arithmetic will work the way we want it to work. We must have ample scope to contribute to fiscal consolidation.
I have just two questions. One is on social sector spending programmes, where it seems a lot of the money does not actually manage to get spent. So, is there a spending capacity issue for the government?
Well, obviously there is. These programmes require a boost in terms of great delivery services. So, there is a problem, which has to be faced head on.
And the last question: Was this an easy Budget? Does rapid economic growth help create easy budgeting? Because you do not have to take tough decisions and numbers start falling into place, and so that is the most important thing that India needs to achieve?
If we can achieve high rates of growth, to an extent the fiscal problem will be a lot more manageable. Considering what is happening in the international financial system, maintaining a high growth rate is something for which the finance minister and the government deserve to be congratulated.
Prime Minister, thank you very much.