Have you stepped on the brake a little bit on the stimulus? Will that affect our growth?
I hope it will not. When I took this decision I asked, how long can I have this fiscal expansion? I would have to come back to the fiscal consolidation path, otherwise it would have become unsustainable. If I did this earlier, if I would not have given the stimulus package that was injected in three installments in December 2008, January 2009 and February 2009, perhaps it would have been premature. I also thought that I should not have a total roll-back, but partial. You may call it a conservative approach, but I thought it was prudent on my part to adopt the cautious approach rather than the adventurous step.
This year was a very difficult time for me, or for any finance minister. There was a lot of uncertainty in the first part of the year. On top of this was an indifferent monsoon. The second half saw robust recovery, which was reflected in second-quarter GDP growth at 7.9 per cent. There was a diametrically opposite picture in the first two quarters in the same year. I had to formulate my proposals in that context. When I saw indications of the economy turning around, I thought it was time for a partial roll-back.
There are two concerns -- growth and inflation. You have rolled back (cuts in) indirect taxes. In particular, you have increased taxes on petrol and diesel. Are you worried that the increase in indirect taxes might stoke inflationary fires?
There will be some inflationary impact, to be honest. I asked the economists. The impact would be about 0.41 per cent on the wholesale price index. There may be some cascading effects also, but one plus point is that these are not new taxes. These taxes were imposed earlier. The economy absorbed them.
You say you will implement the Kirit Parikh report, but what you have done in the Budget today is go in the opposite direction. The Kirit Parikh committee said to lower taxes and increase prices. You have instead raised the taxes, so it's become more difficult to implement the price increase.
That is not correct. The net effect and end impact will be the same. When the prices will go up, they will be adjusted to the market. When I increase tax, it does not mean it will automatically be passed on. These two things should be separated.
It now becomes more difficult to implement Kirit Parikh recommendations?
That is not necessary. This tax was temporarily withdrawn because of the high prices of crude oil. Today, therefore, the case is not that I will have to reduce tax to implement Kirit Parikh report. We will also have to take into account views of various states. In the administered price mechanism, states do not have any share but when we enhance the prices through the duty route, 32
Kirit Parikh on why govt should free petro prices
No Direct Taxes Code in Budget
FM hopeful of high GDP growth
Column: The Pranab Mukherjee Budget
India's GDP to grow by 7.2%: PMEAC