Deputy Chief Minister of Bihar, Sushil Modi, believes the fiscal deficit target of 5.1 per cent of GDP in the Budget 2012 is a gimmick. He tells Gyan Varma what he thinks of the Budget and the recent controversies
The fiscal deficit is expected to come down to 5.1 per cent of GDP from 5.9 per cent. Is the government indulging in extravagance?
Experts say fiscal deficit at 5.1 per cent of GDP is not realistic, as the Food Security Bill will need a lot of subsidies. It is difficult to cut subsidies for fertilizers and diesel. I think the fiscal deficit figure is just a gimmick. While presenting the Budget, the government tries to show a rosy picture by giving some lofty figures. But, at the end of the day, it revises its estimates.
The Budget does not specify a road map for the Goods and Services Tax (GST)...
The government has remained completely silent on the implementation of the GST. Earlier, the government had said the GST will be implemented in 2011, which was later changed to 2012. Since the general elections are due in 2014, it would be difficult for the Union government to go for bigger reforms, such as the GST, in its last year of the Budget.
It seems the Central government is not serious about implementing the GST. It has provided only Rs 300 crore as the Central Sales Tax (CST) compensation to the states. And, in a letter written to me earlier, the government had categorically said there would be no compensation for 2011-12. So, the Budget is silent about the CST compensation, too.
We don’t know what will happen to the states if the GST is not implemented. How will the state governments be compensated because the CST rates are down from four to two per cent? What will happen to losses incurred by the states? Even if Rs 300 crore has been mentioned in Budget 2012, it will be consumed for the earlier arrears. The states had claimed Rs 19,000 crore in 2010-11, but only Rs 6,000 crore was given. So, this is a big issue and I will call for a meeting of the Empowered Committee of State Finance Ministers to discuss these.
Do you agree with the proposal for a negative list of 17 categories in service tax?
In our meeting in Bhopal, we said there are certain activities which fall under the domain of the state governments under the Constitution (seventh schedule, list-II). It is a state list. In entry 49, there is land and building; in entry 54 sales of goods and in entry 56 transport. Personal service is in entry 62. We had proposed that since these activities are under the state governments and the Constitution gives powers to the states to impose taxes, the Centre should not encroach upon their domain.
But now, there is an overlap of taxes — people have to pay luxury tax, value-added tax and service tax. We had approved the idea of a negative list and had given a list of certain activities which should be kept under the Centre’s negative list, so that the state could impose taxes. Only four-five activities have been kept in the negative list, and rest under the domain of states have been removed from the negative list. The states had given their approval for a negative list with a rider that it would be in the domain of the state governments.
Both service tax rate and excise duty have been increased by two percentage points. Will that raise inflation and have a dampening effect on growth?
Nobody had asked for an increase in service tax rates and excise duty. The Union government will cut more than Rs 40,000 crore out of service tax and excise duty.
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Only 10 days back, there was a 20 per cent increase in freight by the railways; then, an increase in passenger fares, an increase in excise duty and service tax. It would hike prices of products and lead to inflation. It would have been better had it been kept at 10 per cent. Even in income tax, the rebate given — of Rs 20,000 — is not substantial for the lower income group or the middle class. Collectively, all these hikes in the last 10 days will just add to the burden of the people.
The Union government says it will build consensus on the issue of foreign direct investment (FDI) in multi-brand retail. Do you think the state governments will agree?
The Bharatiya Janata Party (BJP) as well as many state governments are not in favour of multi-brand retail FDI. But, I personally feel the decision should be left to the states. If they want to implement it, they can go ahead. But, other states which don’t want to implement it — like in Bihar, we don’t want to bring retail FDI because we feel it will affect our local kirana stores — the decision should be left to the states. But, as a policy matter, I am not in favour of FDI in multi-brand retail.
When a revised Bill is yet to come on the Direct Taxes Code (DTC), is it right that the government has incorporated some provisions of the report in the Budget?
There is no problem if the Government of India incorporates some provisions of the DTC. But in the Income Tax Act, there is hardly a gain for the people who are in the lower bracket of the income tax, following the provisions that have been proposed by the Union government. On the one hand, the government has provided meagre relief. On the other, it is taking away large amounts of money from people’s pockets.
The government has called for a meeting of chief ministers on April 16 to discuss the issue of the National Counter Terrorism Centre (NCTC). Do you think a consensus can be reached?
A consensus can be built only if the Union government takes cognisance of the concerns of the state governments. There is a gap between what the Central government has proposed and what the state governments think. Nobody is against the NCTC but the way in which it has been proposed. There are many clauses in which the Union government has encroached upon the autonomy of the state governments. If the government takes steps to resolve the issues of the state governments, a consensus can be reached.
The Railway Budget is in limbo. It is still unknown whether Dinesh Trivedi will continue as the minister or not. How do you view this uncertainty within the UPA government?
Everybody believes there is a policy paralysis —the way this alliance has been working. I have not seen such an alliance in the last 20-30 years. Even Atal Bihari Vajpayee was running an alliance government.
It is ridiculous that a railway minister announces an increase in passenger fares and within half an hour, he is being compelled to resign. It is a mockery of democracy.
It seems he will have to resign in the next two-three days. I have no sympathy for Dinesh Trivedi because he represents the Trinamool Congress, and he should have taken Mamata Banerjee into confidence. In the name of confidentiality, if he says he will not talk to Banerjee, it is not good. It seems Trivedi was playing a double game; he became closer to the Congress and felt he would get patronage from the Central government. I think Banerjee has taken the right step and it will give a message to the Congress that if it takes its alliance partners for granted, it will have to meet similar fate in the coming days.