Will it be a Dream Budget?

Will it be a 'Dream Budget' this year?

Even if it is, chances are you cannot tell the difference till a year after it is presented, says Finance Minister P Chidambaram.

"I think to call a Budget on the day it is presented, as a 'Dream Budget,' is very superficial," he said, adding that such a description should not come on the day of the Budget presentation but one year after that.

Chidambaram, whose Budget for 1997-98 was billed as a 'Dream Budget,' said that in his view "if a Budget together with other initiatives taken by the government, promotes growth of say over 7 or 7.5 per cent or 8 per cent, can be classified as good or sweet dream."

Pointing out that the epithet of Dream Budget was not coined by him, the finance minister quipped: "In the ideal world, there will be no taxes. If cutting taxes alone can be considered realising a dream. Then I am afraid, we can have one big dream, cut all taxes and then go home."

Chidambaram had carried out far-reaching tax reform measures in his 1997-98 Budget, slashing income tax rates bringing down the top slab to 30 per cent. These income-tax rates of 10, 20 and 30 per cent have since remained.

Aiming 7-8 per cent growth this year, Chidambaram on Wednesday hinted at cutting fiscal deficit by 0.3 per cent to 4 per cent of GDP in the coming Budget, which will focus on rural India and the masses.

"Growth is a function of investment. If we can boost investment in 2006-07, I am confident growth will be as good as 2005-06," he said.

India's GDP had grown by 8.1 per cent in first half of 2005-06, and is expected to be over 7.5 per cent this fiscal.

While asserting that the United Progressive Alliance will carry forward reforms and take measures to foster growth, Chidambaram said the Budget will always focus on the people of India, the common man and people in rural areas.

At the same time, he said UPA was committed to cut fiscal and revenue deficits as mandated in the Fiscal Responsibility and Budget Management Act.

"I am obliged to adhere to the FRBM discipline (both for fiscal and revenue deficit). That's what FRBM says," he said, indicating that government is expected to cut fiscal deficit by 0.3 per cent to 4 per cent and revenue deficit by 0.5 per cent to 2.2 per cent in 2006-07.

The statement assumes importance, as Chidambaram had in his last Budget pressed the 'pause button' on meeting FRBM targets and retained fiscal deficit target at 4.3 per cent and revenue deficit at 2.7 per cent.

For 2005-06, Chidambaram said: "I expect it (deficit) to be on target at the Budget estimate."

He said tax reforms announced in last year's Budget have paid off, as consumption demand has gone up and the demand for goods has increased, as reflected in the hike in capacity by India Inc.

Moreover, the fiscal and revenue deficits will be met, which means government's tax collection is also on target. "I think, we are on course to achieve fiscal and revenue deficit targets for 2005-06. After achieving this, if we can achieve the FRBM targets, it will mean the Indian economy is maturing and we are on a better fiscal situation," he said.

He said the government has been able to create an environment conducive to investment as it is reflected by three indicators -- rise in investment proposals and intentions, growth in non-food credit at 37 per cent and the booming Sensex and Nifty and the favourable ratings of India by various global rating agencies.

Moreover, he said UPA has been able to ensure price stability, as has been reflected by the inflation at less than 5 per cent.

"We have maintained reasonably stable price regime despite the severest challenges faced in last decade of high oil prices, natural calamities like tsunami, floods and earthquakes," he said.

The government has also carried forward reforms in banking and pension by introducing bills to amend the Banking Regulation and RBI Act, and pushing the PFRDA legislation.

"The Parliamentary Standing Committee has given its report and the banking and pension bills will go forward," the minister said.

Despite the stiff opposition from coalition partners, Chidambaram said the divestment of non-Navartna PSUs were on track.

"We will monetise some portion of government equity and the proceeds from divestment will be put into National Investment Fund," he said.

Recalling the high points of 2005, he said: "Big investors came to India along with major banks, financial institutions, funds, auto, hardware makers, IT leaders, steel and mining companies."

Chidambaram attributed the faith reposed by foreign investors in Indian market to the regulatory regime as most of the regulators in capital market, banking, telecom and electricity could be compared with the best in the world.

"We are learning and improving. We have not made any major mistakes. We have stayed on course. We have articulated a vision that will remain in course," he said.

"All said and done, are we on a high growth path, are more people getting jobs, is economy mature and stable, whether India is being invited to the high tables of the world, is India heard by the world powers? These are all indicators, which I believe remained positive in 2005. I fervently hope that it will remain positive in 2006," he said.