'I have been cautious, not adventurous'

Finance Minister Pranab Mukherjee gave a post-budget interview to Business Standard. Here's the transcript:

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

per cent of it goes to the states.

Oil companies are making huge losses and you have taken that extra increase in prices instead of freeing the price and allowing them to make some money and stop their losses.

But I am meeting substantial part of it, even this year if you see the fine print of the Budget. For 2008-09, I have given them Rs 10,000 crore worth of bonds. This is the only bond issue I have given. Otherwise, I have decided to give it in cash to bring transparency in the accounting system.

Will you move towards freeing oil prices?

I have indicated that this decision will have to be taken by my colleague in the ministry of petroleum in the course of time.

You have made some 25 million income tax payers very happy today. Taking a three-year perspective, corporate income tax revenue has gone up by more than 60 per cent while individual income tax has gone up by only 1 per cent. Income tax is stagnant while corporate revenue is shooting up.

I accept your point. The share of the contribution of individual income tax in the overall tax basket has come down. Earlier, when the tax base was so low, individuals contributed much more, but we have left that philosophy behind. Even with these reductions, the tax-to-GDP ratio is 10 per cent-plus. It is not as high as 12 per cent, which I want to achieve.

You have left three critical tasks for next year – one is the Goods and Services Tax, the Direct Taxes Code and making service tax universal, which you said you don't want to do this year. In a sense, this is a semi-final budget. The final budget is next year.

No. Not semi-final. Final I cannot do because I have to wait to evolve a consensus. I am not the master alone. There are 28 states. Their views have to be taken into account for GST. In the Direct Taxes Code I am the master. Service tax will be subsumed in the GST.

Where will you get Rs 40,000 crore disinvestment money form?

Experts are to advise me which company, at what point of time, will be mature for disinvestment and where we can get the maximum price.

For the first time in budget speech, there is no mention of the revenue deficit, which has gone up. The pattern of deficit has got worse.

I have stated that I have accepted the roadmap of the Finance Commission. In 2009-2010, I have not been able to stick to the projected revenue deficit but if I have to reduce the fiscal deficit, I have to reduce the revenue deficit.