New Delhi: Finance Minister Pranab Mukherjee on Friday said Budget 2010-11 is aimed to give the required direction to the economy and assured that 9% GDP growth is achievable again.
In his post-budget interactions with the media, Mukherjee said he had three considerations while proposing the budget -- how quickly can the economy come back to nine-percent growth, to achieve fiscal consolidation and ensure inclusive growth.
"While formulating my budget, I had three considerations. First, how quickly I can come back to growth trajectory to achieve 9 percent GDP growth, the second was the fiscal expansion we have to do in 2008-09, 09-10. How we can come back to the path of fiscal consolidation. The third approach which we had is inclusive growth," Mukherjee said.
He also reiterated that inclusive growth was an article of faith for the UPA government, adding that the budget aims to convey a message that fiscal policy and development allocation will go hand-in-hand
"I had taken a broad approach. Yes, temporary concerns like prise rise are there but time has come that India not only thinks big, but acts big,” he told in an interview to a news channel.
He said as per the plan allocations announced in the budget, 37 percent has gone to social sectors, 46 percent to infrastructure out of which 25 percent is for rural infrastructure.
"On the path of fiscal consolidation, I think I have given the correct signal. As per the advance assessment, it is expected to be 7.2 percent of GDP growth for the year 2009-10. I
hope it will be a little higher.
"For the year 2010-11, I think we will be able to achieve what has been projected in the Economic Survey," Mukherjee said.
Balanced approach to taxation
Despite the unprecedented walk-out by the opposition during the budget speech over his decision to hike the duty on the petroleum products, Mukherjee justified it saying that global crude prices were much softer than last year and there was no need to continue with the concession.
"Customs duty was withdrawn when the prices of petroleum reached as high as USD 122 per barrel. Now it is much softer and there is no reason to continue the same concession,"
He said he had adopted a balanced approach in taxation proposals. "I have not imposed any duty which was not imposed earlier," he said.
In his Budget today, Mukherjee proposed raising customs duty on petrol and diesel to 7.5 percent from 2.5 percent and excise duty by Re one a litre to Rs 14.35 and Rs 4.60 per
litre on non-branded (normal) petrol and diesel respectively.
However, he agreed that there was a need to deregulate the entire fuel pricing mechanism.
“Before 2004 deregulation was there, we regulated the deregulation,” he quipped but was quick to add that that the UPA government’s rigidity on the issue would be softened soon.
“We ourselves did it (regulation), so it would have been interpreted that we did not applied our mind in the first place.”
On the timeframe within which the fuel prices would be freed of regulation, he said, “It will be difficult to indicate the time frame but govt will surely consider this.”
Mukherjee pointed out that he had not fully rolled back the excise duty as the industry was still in the process of recovery.
"The industrial growth, particularly in the manufacturing sector in the month of December clearly demonstrates the validity of my move," he said.
According to the Index of Industrial Production data, factory production grew 16.8 percent in December, indicating pick up in economic activity.
Mukherjee, importantly, also hinted on the fixing the goods and services tax (GST) at 10% but pointed out that it would be not possible unless there is a consensus between the Centre and the states on the issue.
“I require support of major stake holders, and time to get as near perfect as possible,” he added.
On the direct tax regime, the finance minister assured that it was still open for discussion, “My mind is open on the issue and thus we will implement it only by April 1, 2011 after addressing everybody’s concerns.”
Regarding the delay in taking up the Insurance Bill, Banking Bill, Pension bill and Companies Bill, the Finance Minister appeared confident that atleast the Companies Bill will be cleared in the near future but for others the government still need to build political consensus – which the UPA had failed to build even during its first term.
“Companies Bill will be done, but there is a problem with insurance, banking and pension bill as we did not have the numerical majority in both houses of Parliament without support of left and other allies,” he said.
Taking the point forward, he added, “Therefore all the coalition partners ought to be on board for it can go through the Parliament.”
The finance minister listed out three crucial areas that are most responsible for high food inflation - edible oil, pulses and sugar.
He said in an interview to a news channel, “The First two are perpetually in short supply, that’s why I have proposed development of 60,000 villages as oil seed and pulse seed villages.”
The move- as recommend by the MS Swaminathan Committee report – is aimed at increasing the production of these items to bridge the wide gap between demand and supply.
On sugar, he pointed out that its production is cyclical in nature. Referring to the trend in the last four years, he said, “Two years there was adequate supply and for two years there was short supply as farmers keep shifting between cane and wheat- rice.”
Taking forward the strong emphasis –during the budget speech - he put on the need for second green revolution, he said: “We require another green revolution. But apart from that if we shift the same technology that brought in the first green revolution in Punjab and Haryana to the east of the country then adequate food can be assured in the medium term.”
“If we cannot increase our productivity it will be difficult to feed 120 crore people,” he opined.
India Vs China
On the fact that China has overtaken India on the economic growth front by miles, he pointed out, “We are too late, they began (economic reforms) in 1978, we began in 1991 and that too with a lot of resistance.”
However, he did concede that today – more or less - there is political consensus on big issues concerning the economy.
Interestingly, Mukherjee, while accepted that democracy is strength as it helps sustaining development but it is a constraint when it comes to pure decision making.