Finance Minister P Chidambaram on Wednesday said the Union Budget aims at pushing farm growth to four per cent without which a high 10 per cent economic growth would not be possible.
"We talk of 10 per cent growth rate. Unless agriculture grows at 4 per cent, whatever combination and permutation we may try, we can not attain 10 per cent growth," he told the captains of Indian industry in his customary post-Budget meeting with apex chambers.
The Budget has gone an extra-mile to provide a helping hand to agriculture by dealing with crucial issues of credit and infrastructure to push farm growth to 4 per cent generating additional rural demand for industry and services," he said.
Setting a target of 12 per cent growth for the manufacturing sector, Chidambaram has invited trade and industry for a meeting on May 1 to remove fiscal obstacles that came in the way of the target.
Of course, he said the 10 per cent growth requires industry and services to grow at a double-digit figure.
"These issues could be addressed. I want the manufacturing to grow at 12 per cent. Let me make an open offer. Take time and meet me on May 1. All chambers can make a list of what stands between you and 12 per cent growth and we shall address them," he said.
Services sector, if they have any issue: "I am willing to address those also," he said.
"Urban English speaking middle class is not all-India. India is Bihar, Orissa and Andhra Pradesh where people are still starving and committing suicide," he said.
To the demand of chambers for bringing agriculture income into the tax net, Chidambaram said there was no constitutional provision as it was a state subject. But the other income of rural rich was being taxed.
He ruled out the possibility of providing crop loan at 4 per cent as recommended by the M S Swaminathan committee to deal with indebtedness of the farmers.
At the current bank rate of 6 per cent and inflation at 4.2 per cent, "crop loan at four per cent is simply not possible," he said.
The Budget has announced that government would give short-term loans called crop loans for the kharif and rabi seasons to farmers at a concessional rate of 7 per cent.
This will result in an outgo of Rs 1,700 crore (Rs 17 billion) from the exchequer.
Stressing the need for fiscal prudence, he said while preparing the Budget, he had drawn a "thick-line" (read Fiscal Responsibility and Budget Management Act stipulations)
Compared to Budget estimate for 2005-06, he said fiscal deficit target of 3.8 per cent GDP for 2006-07 envisaged a reduction of 0.5 per cent of GDP and Revenue deficit at 2.1 per cent, which was a reduction of 0.6 per cent of GDP.
These were more than the FRBM prescription of reducing fiscal deficit of 0.3 per cent of GDP and revenue deficit of 0.5 per cent of GDP, he said adding this was because he wanted to make up for the "pause" last year and also that the government reduced the deficits beyond the target in the revised estimates.
Pointing out that Budget tackled the crucial issue of infrastructure in agriculture, Chidambaram said corpus of the Rural Infrastructure Fund is raised to Rs 10,000 crore (Rs 100 billion), besides focusing on irrigation programmes and restoration of water bodies.
He said the government would approach World Bank in April with a Rs 4,400 crore (Rs 44 billion) project to restore 20,000 water bodies in 1.4 million hectare.
In the industry, the Budget has focused on food processing, petrochemicals and chemicals, IT, power, coal, shipping and petroleum sectors, he said.
The finance minister said the Budget proposal to raise FII limit in corporate bonds from $0.5 billion to $1.5 billion would make the raising of funds by the industry much easier.
He clarified that long term capital gains tax has not been reimposed as feared in certain quarters. The long-term capital gains would, however, be taken into account while calculating profits of the companies for levying minimum alternate tax whose rate has been increased from 7.5 per cent to 10 per cent in the Budget.
Referring to 2 per cent increase in services tax, Chidambaram said this had been necessitated to make a beginning on the road map to introduce Goods and Services Tax by April 1, 2010.
He said he could not say at this stage what would be the GST rate which could be 14, 15 or 16 per cent.
GST is aimed at bringing single common market.
Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Discussion Group.