In his exclusive interview with Network18's Raghav Bahl, Finance Minister Pranab Mukherjee said fiscal policies and developmental allocations go hand in hand
The Budget has been hailed by almost all quarters as positive and more importantly, 'balanced'. In his exclusive interview with Network18's Raghav Bahl, Finance Minister Pranab Mukherjee said fiscal policies and developmental allocations went hand in hand. However, he said the time had indeed come 'for India to think big and act bigger on the global stage'.
Below is the edited transcript of Pranab Mukherjee's exclusive interview on CNBC-TV18.
Q: If I were to use adjectives like resilient, safe, predictable—would those be acceptable to you as a definition of today’s Budget?
A: You know it’s very difficult for me to define Budget from other’s point of view. But surely I wanted to convey a message—if somebody ask me to define the Budget—I would like to say that yes, it conveys a message because my fiscal policies, my developmental allocations go hand-in-hand. While I have enhanced the allocation considering that it is priority sector—for example agriculture.
I have also tried to give fiscal concessions in the form of either exemption of customs duty or excise duty to ensure that agriculture develops. But I had three basic objectives. One was that we must come back to the path of higher growth trajectory. Secondly, we must move on the path of fiscal consolidation and third is the inclusive growth, which is the article of faith so far United Progressive Alliance (UPA) is concerned, adequate allocation has been made for upliftment.
Q: You opened this Budget speech by saying that it shouldn’t just be a statement of income and expenditure but you wanted to dwell on the vision statement of the Budget as well. Was this learning from the last time where there was some criticism of the fact that you dwelled too much on the minutiae of the Budget and the vision thing was lacking?
A: You are correct to some extent and also I thought that the time has arisen and the choice was very difficult—I could have become just a pedestrian looking at the concerns in hand, completely ignoring the broad approach each one would like to have to reach the goal—but I chose the latter. I thought that, yes, temporary concerns like price rises or certain other aspects that are there but the time has come when India must not only think big but act in a bigger manner so that it can take its rightful place in the committee of the nations.
Q: But just in case the convergence becomes with some outliers becomes difficult. There could be a Plan B?
A: Let us see how we do it because we are talking a little bit. But we have to give a pause because of my engagement with my own work and the state budgets are also coming. They will have to do this. The Thirteenth Finance Commission recommendations have come.
Q: In fact that has empowered GST by putting out Rs 50,000 crore?
A: Rs 50,000 crore they have earmarked for it.
Q: They have earmarked for any contingency which may arise. So that has in fact made the task easier for the states also to get convinced?
A: No in fact in consultation with the states I referred to Finance Commission in the later part because they were talking of a few compensations and the final Thirteenth Finance Commission was operational at that point of time. They were working, doing their jobs. So I referred it to them that you also look into it. They appointed a task force, the task force made the recommendations and they have accepted it.
Q: Now to the Direct Tax Code (DTC). There of course it is administratively much more under the control of the Central Government and the Finance Ministry. Some of the concerns around DTC whether it's the definition of MAT on gross assets. That has got a lot of people exercises, that is not a fair imposition of the tax or EET versus EEE or the housing loans. Are these exercising the mind of the Finance Ministry- can we expect that there will be a discussed relief on these matters or is the mind closed?
A: As I started, when I released the discussion paper of the DTC, I addressed the audience that my mind is open. My mind is open. I have considered all these aspects and that is why I am confident that I will be able to implement DTC from April 1, 2011. Before that the legislative process is there and all these issues will be addressed to satisfaction of the persons concerned.
Q: Is it likely to happen only after the West Bengal elections?
A: Maybe even earlier but we are working on it. This in anyway is going to be passed—everybody is recognising the need of it. It is one thing from outside to make observations and oppose a particular policy and it is another thing when you feel the pinch being in the government.
So now everybody feels that there is a necessity of acquisition of land in order to have the developmental project and to get the clearance of land is taking quite some time.
To be very candid, in my Budget speech, I myself mentioned one of my concern that our delivery mechanism—if we cannot improve and if we cannot make change in the attitude of our governments—that alone can stand in the way of what India can be and what India should be. I myself have admitted it.
Q: I come to one more thing which I am sure you and the ministry must be very concerned about, the way inflation has come back in the economy, our gross domestic product (GDP) has swung by only 2% points, we have come from a low of 6% to close to 8% but inflation has swung from 0% to double digits. So clearly while there are a lot of factors and it is a complex phenomenon but one factor that clearly is coming out is that there are structural rigidities in our economy whether it is food, infrastructure or transport, all these things haven’t reached a stage where they will allow us to grow very fast, the specter of inflation will hang over you, so you have to ease the supply side?
A: We will have to deal with the supply side and the bottlenecks are to be removed. That is why many proposals which I have indicated in my Budget speech and also formulated the proposals are to improve the supply side. Take the case of three crucial areas which are responsible for high rise in the prices of food articles, edible oil, pulse and sugar. Edible oil and pulses we are in perpetual short supply even to the extent of 40% and 15%.
Therefore the 60,000 districts which I have earmarked to synchronise with the sixtieth year of the Republic that these are the districts where dry-land farming will be boosted and I have allocated Rs 400 crore for that mainly on these two items. I have even used—these will be the 60,000 villages not districts—that these will be the oilseed and pulse villages.
So in 60,000 villages if we can implement this programme of dry-land farming of course it is as per the recommendations of Swaminathan, he has worked on these and it will be possible for us to bridge that gap.
Sugar is a cyclical, just if you look at from 2007-2008 till date, two years there were adequate supply, two years there is short supply because the farmer shifted from sugarcane production to wheat and rice production when they, as per their calculation, found better returns in wheat and paddy than on sugarcane.