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Following is the text of Finance Minister Shri P. Chidambaram’s interview with All India Radio after the Budget-2005-06 presentation on February 28, 2005:
Question: You had suggested in last year’s budget that the election 2004 is the vote for a change. There is no doubt that the economic has extremely done well this time despite the shortfall in Kharif, the volatile global oil prices and the unexpected tsunami disaster. All indicators are up 6.9 percent GDP growth inflation down to 5 percent and industrial growth up by 8.4 percent and exports 23 percent. What has been the main thrust of the budget exercise this time and what is your expectation of its impact on GDP growth?
FM: The main thrust is to ensure that the investment momentum is kept up. There is clearly rise in business confidence. That is showing up in the rise in non-food credit. Therefore, I wanted to do everything to boost that sentiment we must not do anything which will affect that sentiment. If, as I hope the investment boom will continue and I expect another very good year of growth.
Question: What is your assessment on GDP growth, roughly? Have you worked out anything on that?
FM: It is too early to make assessments. GDP growth in this country is clearly affected by the monsoon. We are now in the last day of February. Monsoon doesn’t break until late April or May. It would be fool-hardy if any one to make any assessment on GDP growth without knowing how the main monsoon, I mean the south west monsoon behaves. Assuming the monsoon does well, and I think, even agriculture will grow at a brisk rate. And given that manufacturing and services are already on a high growth path, we should do well. But let us wait for the monsoon.
Question: To keep with your promise, you have brought down the peak custom level. How long it will take for India to reach east Asian level?
FM: We only need to take another one and half or two steps. Now the peak duty is 15. Asian levels are between five and ten. So, not very long.
Question: The national common minimum programme attaches high priority to the social sector. In fact the left parties are very happy for the huge allocation you made this time. How it is reflected in the budget and what a common man can expect in terms of education, health, social security and job opportunities?
FM: 25,000 crore rupees is the additional allocation this year on CMP related programmes. If, this money is well spent on basic education, health care on rural infrastructure, the road programme, clearly there will be multiplier effects in the economy. Jobs will be created in rural India. Money will be in the pockets of rural people. He will spend more. But this money must be well spent. Jobs will come out of adding more land to the category of irrigated land, building more houses in rural areas, textile sector and leather sector. If all of them grow it will create jobs. I think there has been considerable job creation even in 2004-05 and I am confident there will be large number of jobs that are thrown up in 2005-06 also. But the key is that the investments must be made. There should not be slowing down of investment.
Question: Bharat Nirman is certainly a project of tall order to revamp the rural sector. How would the government raise the huge resources required for it?
FM: Well it is over a period of four to five years. We have set target for 2009. Let us assume that Bharat Nirman will cost us, say, 300,000 crore rupees. Which means we have spent something like 75,000 crore rupees a year. That is not impossible. We can raise the resources. The key is are you spending it properly and the outcome equals the outlay. So far in this country we have looked at the outlay. Nobody has ever asked whether the outcome equals the outlay. This time we are very clear. The Prime Minister is very clear. We are going to put in place a mechanism. If you spent ten rupees, you must show me what is the outcome for spending ten rupees. If I give 500 crore rupees for a project I intend to ask where is the works for 500 crore rupees. If the outcome more or less equals the outlay we will find tremendous benefits and money can be raised . After all there will be more income. More taxes will be paid and money can be found.
Question: The share of the agriculture to GDP growth has gone down to 3.5 percent since 2001 and you have also said in your speech that the problems of farmers have to be addressed with a sense of urgency. What are you offering to the farmers this time?
FM: We are offering to invest money and bringing in one crore hectares to the category of irrigated land. We are putting money into AIBP, Accelerated Irrigation Benefit program to complete last mile projects. Putting money in food processing. We are putting agricultural market infrastructure, grading, storage and transport. We are trying to revive the sugar industry. We want to start a massive re-plantation rejuvenation scheme for the tea industry. We are going to give farmers 30 percent over this year’s credit disbursement. It will take total credit disbursement close to 1,40,000 crore rupees. We want to add another 50 lakh farmers to the portfolio of banks to take them out of the money lender’s clutches and make them borrow money from the banks. Quite a bit is being done for agriculture. But agriculture share in the GDP will continue to go down. Because at the best of times agriculture could grow, say at 4 percent. But manufacturing grows at 8 percent or 9 percent and services grow at 8 percent. The share of agriculture of the total pie will indeed come down. That is not bad by itself. The point is does agriculture grow at between 3 and 4 percent a year.
Question: What is your main offer to the industry, especially to textiles this time?
FM: Textiles are in a very buoyant mood. Current year we think that an additional 20,000 crore rupees is being invested in the textile industry and next year we expect that another 30,000 crore rupees will be invested in textile industry, which means the textile entrepreneur envisages a very bright future. We have cleaned up the excise regime for natural fibers. They can go through the zero duty regime, which is the biggest boost which textiles has got in many, many years. This year I have cut the polyester filament rate from 24 to 16, that accounts for 80 percent of the man-made fiber and therefore, that will give a big boost. Textile machinery duties have been cut very sharply on large number of textile machinery items. Large number of other textile related goods customs duty has been cut very sharply. By and large I think textile industry is poised to do well and I will watch it very clearly and if necessary I will do more. Clearly, after agriculture it is textile which is the biggest employer, which is India’s oldest industry. Therefore, we will do everything that is necessary to make textiles modern, competitive and world-class.
Question: Almost everyone expressed reservation over the proposal to levy 0.1 percent tax on withdrawal of cash more than ten thousand rupees. How do you say that it will contain black money?
FM: I am more amused than concerned. Who is everyone? 100 crore people in this country do not withdraw ten thousand rupees cash on a single day. Please don’t use the word everyone. Now what is the purpose of this tax. It is not to raise revenue. It is not intended to be a revenue raising measure. It is intended to discourage people from indulging in cash transactions. For domestic requirements, for your provisions, vegetables, fruit, milk, what would a normal household withdraw at any given time? Five or six thousand rupees? You don’t pay tax. Even if you withdraw ten thousand, you pay ten rupees. You send somebody to a bank in an auto to cash a cheque for ten thousand, the auto charge will be 20 rupees. If you go to an ATM and use your ATM card the ATM charges you thirty rupees. An outstation cheque a bank charges you thirty rupees. All I am saying is if you withdraw cash I want to know, who is withdrawing. I want a tax trail on you and therefore, I am asking you to pay ten rupees. But I can make it five rupees. That is not the point. The point is not that the money that is being collected. Nobody is opposed to the ten rupees. I think everybody is secretly opposed to coming in the tax trail. But I think in a matured economy like India’s, like any other economy in the world, you must encourage people to move to the cheque transactions. Payments must be by cheque. The whole idea is it is an anti-black money measure. The CMP wants me to take some steps to control black money. I have taken a very minor step, that is why I said I am more amused and concerned. Let parliament debate it.
Question: Will the restoration of excise duty on iron and steel to 16 percent ? Will it push up the prices?
FM: Not at all. There was no justification for the NDA government to suddenly reduce the excise duty on steel from 16 percent to 8 percent. Steel is a leading metal. If the leading metal pays 8 percent excise duty why should any other metal pay 16 percent. One should declare that the CENTVAT rate is 16 percent and the leading metal does not pay 16 percent. Then the meaning of CENTVAT is lost. Steel must pay 16 percent, because that is the CENTVAT rate. Virtually all the steel, which is consumed is MODVAT. The only one section of consumers is not able to MODVAT it. Every other section can MODVAT it, industry will MODVAT it, construction industry will MODVAT it. Therefore, there should not have any impact on prices.
Question: One more clarification everybody is requiring. Will the producers pass on the benefit of reduction of customs duty on crude to the consumers?
FM: They should, they will have to waive up their prices. The calculations I have made shows that the reduction in customs duty on crude, the elimination of customs duty and excise duty on both LPG and subsidized kerosene and the specific ad-valorum duty on petrol and diesel altogether is revenue neutral, which means I don’t get an additional rupee by way of revenue, which means prices will not go up. But if the prices will go down, I can’t say, that is for the petroleum ministry to say after they re-work the prices. But I should think that prices will remain stable for some more time.
Question: People affected by tsunami in Tamil Nadu in Andaman and Nicobar islands, they were expected something in this budget now, you said of course that everything will be taken care of. How it is going to be implemented?
FM: What is the problem. Whatever money is required, it will be provided.
Question: Left parties have said that they welcome the huge allocation to social sector, but they have very severe reservation of opening FDI in mining and other sectors?
FM: I have said that there are opportunities for FDI in mining, trade and pensions. I have also said that we will come back to parliament after due consultation and thorough discussion. I don’t think, ideas should be opposed. When an idea is thrown up, it should be debated. The debate will throw up more aspects of the issue. I think everybody should welcome a debate. And all that I have said is we will collect the proposals and those proposals can then be debated.
BSC/BY-51/05
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