Perked up by buoyant economic fundamentals as year 2004 draws to a close, he outlines his reforms agenda that includes simplification of both direct and indirect taxes, raising savings and attracting investment in all sectors.
In an interview to PTI, he also spoke of the strong need for attracting huge investments in agriculture and infrastructure running into a few hundred billions of dollars, quicken banking reforms by coming out with a roadmap and also government's monitoring of inflation and management of money supply.
Asked about the thrust of the budget exercise which has already begun and whether it would be radically different from the earlier budgets, Chidambaram said "We are trying to have a growth-oriented and inclusive budget which cannot leave any section".
"You must be different in a substantive way. You will have to wait for the exercise to complete. Keep the tax structure simple but it should also be revenue generating," he said adding "it is for you to judge whether it is radically different."
Chidambaram said reforms of the tax structure were linked to keeping it simple and to raise the tax-GDP ratio from the present nine per cent to beyond eleven per cent.
The main objective was to have a tax regime that will remain stable over the next four years. Secondly, he said "we must encourage ways and means to encourage savings rate which is satisfactory but not good enough to sustain higher growth."
"The savings which are at present 22-23 per cent of GDP needed to be improved by 2-3 per cent. We have savers but they will have to be turned into investors," he said.
As infrastructure sector needed huge investments, he said "we need sound and alternative methods to raise resources from banks, insurance and pension funds."
In this connection, Chidambaram said the government was committed to putting in place the Pension Fund Regulation and Development Authority by January 1.
There could be a few days delay in the issue of an Ordinance in this regard in the face of Tsunami disaster that hit South India.
On criticism resounding various steps to widen the tax net, Chidambaram said it was to ensure that nobody who had the potential to pay taxes escaped the net.
Chidambaram said the real expansion in the tax collection could come from the corporate sector and certainly not from the salaried class who could not form the bulk of the tax.
The main issue was whether the government was able to collect the taxes that taxpayers should actually be paying, he said adding the purpose of Annual Information Return and Tax Information Network were meant to capture real expenditure by individuals to compute their income.
Chidambaram said at the moment the government had decided to keep filing of AIR for only seven items and justified the inclusion of purchases of more than Rs 2 lakh through credit cards annually for AIR reporting.
"I don't think there is anything wrong in it," he said adding they would have only to disclose. When the nation's per capita income is just Rs 30,000, any disclosure of over Rs 2 lakh purchases through credit cards was justified.
Referring to inflation, Chidambaram said it continued to be an area of concern. The measures available to control inflation are fiscal, monetary, imports and removing bottlenecks.
"We have used several measures to moderate inflation from time to time," he said adding the real issue is that global crude oil prices should come down to below $40 a barrel and that "I am afraid was not happening."
Another wrinkle was money supply induced inflation. Management of M3 (money supply) was not astute (by the previous NDA Government) perhaps because of the mistaken belief that control of money supply will affect the India shining campaign, he said.
This year money supply has been managed by RBI quite astutely by keeping it below 14 per cent, he added. Chidambaram said the government was monitoring the situation to ensure that money supply-induced inflation did not occur, particularly when foreign exchange reserves were surging.
Yet another area of concern was implementation. "Implementation is very long," he said adding "we have to create a situation where both private and public sector are able to get their loans disbursed.
Chidambaram said the level of investment needed was huge, particularly in agriculture and infrastructure, which required hundreds of billions of dollars.
He said it augured well for the economy that there has been a 26 per cent growth in the investment proposals which have shot up to over Rs 17,93,970 crore (Rs 17939.70 billion) this year. This, he said, was a welcome development.
The bulk of the investment had to come domestically, he said adding one important factor for this was to step up savings by at least two to three per cent.
