Monday, February 28, 2011

Union Budget: Q&A with Pranab

New Delhi: Finance Minister Pranab Mukherjee, Monday, expressed confidence that the policy direction prescribed in Union Budget 2011-12 will positively affect the life of the aam admi by addressing the problem of high inflation and pushing economic reforms.

In his interactions with the pr
ess after presenting the Budget in the Lok Sabha earlier today, Mukherjee pointed out that he had to formulate the budgetary proposals amid a lot of uncertainty across the world. “I could have done better; even then the best can be improved. I have given clear direction towards tax inflows, fiscal consolidation, and that reform always does not mean that you should attract headlines. Real reform is the change in the policy, and in its implantation which will positively affect the life of the aam admi,” he said. 

Through the Budget proposals, Mukherjee stressed that he has tried to signal reforms without making any dramatic announcements. 


Referring to rising inflation, the minister said, he tried to address the problem by allocating resources and come out with schemes to augment supplies of pulses and edible oil. 

"We have taken special programmes - about six-seven programmes - to be implemented under Rashtriya Krishi Vikas Yojna. I have allocated resources and schemes are being worked out for pulses, edible oil, providing fodder for the cattle, green revolution in Eastern India." 

To check high prices, he said, "we have to remove the supply bottlenecks and therefore the agriculture response should be to improve the supply bottlenecks". 


The Finance Minister elaborated on the new policy on subsidy where direct cash subsidy would be given to beneficiaries of kerosene, LPG and fertiliser subsidy. 

“Everybody agrees that Kerosene is highly misused and not reaches the consumers for whom it is meant. For kerosene, fertiliser and LPG, I will go directly to the consumer. I am hopeful that by March 2012 we will be able to implement it across the country,” he said. 

On whether the government will lower the subsidy on diesel, the Finance Minister while accepting that subsidies have to be reduced, did not indicate a specific time towards achieving that target. 

He said, “We have decided that it will be done at appropriate time as on oil it would be too premature to make a decision as the situation is too volatile. For example in August 2008 crude oil prices was at USD 147 per barrel but in January 2009 it came under USD 50.” 

Fiscal deficit 

Regarding the big disparity between the nominal GDP growth (up by 40%) and borrowing (up by 4 times), the FM said that in absolute terms the level of borrowing would be same in the next year as it is in the current year. 

He highlighted his continued focus on controlling fiscal deficit by pointing that in the current fiscal he used non tax big receipts to reduce deficit. “I did not to use non tax extra money to reduce fiscal deficit and not use it for populist schemes...fiscal signal quite clear,” he said. 

The Budget, Mukherjee said, also sought to move ahead on the path of fiscal prudence by controlling expenditure and reducing fiscal deficit. The minister proposed to reduce fiscal deficit to 4.6 percent of the Gross Domestic Product in 2011-12 from 5.1 percent estimated for the current fiscal. 

"I have conveyed the message in this Budget that we shall have to resort to fiscal prudence and fiscal consolidation should take place," he said. 

Old hat political activist 

Terming himself a ‘old hat as a political activist’, Mukherjee expressed his optimism is overcoming the political opposition to certain policy issues like Goods and Services Tax and Direct Tax Code. 

“It may possible to implement DTC from April 2011, but it requires political consensus. So therefore there is challenge to bring consensus amongst political parties. I will use this year to narrow the divergent views on the issue,” he said. 

“It is not just for casual mention. We shall have to go to GST and we shall have to address the concerns of the states. I am not insensitive to the concerns of the states," he added. 

However, he accepted that a timeline for GST implementation is difficult at this stage, while assuring states that there will be no loss in revenue to them due to its implementation. 

Nobody can stop India 

On a report by Citibank that predicted that India could become largest economy by 2050, Pranab expressed optimism that it would be reality. 

“We can take on, we can move forward, let us keep our divergent views, but when the broad national interest come, let us march ahead and in more than once instance earlier, we have done it…nobody can stop India from moving ahead,” he said, adding that he would like to die with that ambition.

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