Jaswant Singh: Thinking
beyonhd being the second-best
days after presenting his Budget, Finance
Minister Jaswant Singh looked relaxed and, gauging by the
generally positive reaction to his budget, relieved. His Budget
speech, which took a long 135 minutes to deliver (although Singh
himself wanted to speak for just 40 minutes) took six drafts before
it was finalised-a departure from his old job as foreign minister,
where he preferred speaking extempore. Singh, who expects, trade
and industry to "stand up and seize the opportunity",
is also busying himself with answering every individual e-mail that
his ministry gets about the Budget. "I am assuring a reply
within 24 hours," he told BT's and in
an exclusive interview. Excerpts:
You must be particularly pleased with the
way industry and the middle-class have responded to your maiden
Budget, especially industry, which gave it such high marks.
Please, please.... The challenge is in the implementation
of the Budget proposals and not simply in its pronouncements. It's
in the implementation that the victory lies.
Your budget has been variously described
as a "middle-class", "please all" or even as
"populist". How would you describe your Budget?
Quite true. But really, I have attempted to
unleash the creative energies in India-to re-awaken the immense
reservoir of ability and power of its citizens. Why are we afflicted
with this continuous essence of being second best? Why do we continue
to question our own ability and why do we start a venture with the
thought of failure in mind. Think of success and I assure you that
success will rush up to the feet of India.
If we look at reaction of the stockmarket
in the post-Budget scenario, it has been quite tepid. How important
is the market sentiment for you?
As a source of capital, the markets are very
important. I am committed to promoting capital markets-both secondary
and primary-and lots of measures have already been taken to improve
the condition. But it is also true that markets have suffered in
the past. But markets in India, like we are global in our reach
today, are under the global influence. Yet I would rather that the
market reflected on all the measures taken and reacted not mercurially
but in a steady and a consistent fashion.
Despite focusing on agriculture, the Budget
has not talked about any specific package for the drought-affected
states, impacted by the worst drought since 1987.
|"I have tried to unleash the creative energies
in India-to reawaken the immense reservoir of ability"
You are being most unkind to me. I can be charged
with parochialism in my concern for the drought-affected but not
neglect. In fact, I will give you just two examples. We have spoken
about both water management and drip irrigation. Though the allocation
of funds is small, I have set in place a taskforce for the desert
districts. Now, I may say that it is only for the desert districts
but its beneficial effects will be felt elsewhere too. Plus, we
are emphasising on management of water resources. So it is very
much there. But then there is another angle to it. I can only do
so much. Agriculture is essentially a state subject. The Central
government can act as a catalyst, as a policy-giver, as a hand-in-support,
but it can't go down and start doing things.
Why did you decide to merge what is traditionally
Part A and Part B of the finance minister's speech?
The speech of the finance minister on the occasion
of the Budget is a very broad pronouncement of the management of
country's fiscal and external policies. It does not, however, mean
that it is the final word. But I found that on every policy statement
being made, for example, on textiles, the policy announcements were
in one place, and the details were in some other part. Rather than
having such a fragmented approach, I thought it better to have the
full package at one place. There is no law which says that this
should be in Part A and that should be in Part B.
Another innovation has been the cash management
proposal for funds allocated to each ministry...
The cash management proposal, I believe, is
a little more modern way of managing the Budget of the country.
I wanted the budgetary management to move away from simply allocation
of money to having a method whereby we translate that into actual
physical work. So various ministries will be asked for their fund
requirements for a certain period. If the funds are utilised before
the specific time-period no new fund will be made available. Similarly,
no additional fund will be made available for non-utilisation of
Your Budget has focused on some of the sunrise
sectors like information technology, pharmaceuticals and biotechnology
in terms of tax and other incentives. What are your expectations
of growth and employment generation from these sectors and do you
think that these sectors will spearhead growth in the economy?
I don't want to specify or single out any particular
sector. However, I think it is the totality, the cumulative consequence
of all the sectors that will generate the dynamism in the economic
growth. These are the knowledge-based, infrastructure and labour-intensive
industries, health and social sectors. It is really a spread-textiles
and machine tool is in. It is not an abstract design but a well
thought out strategy.
|"In future, changes in tax rates are going
to be marginal, not radical"
What about incentives for the manufacturing
On manufacturing, please reflect on the various
proposals. The reduction and rationalisation of excise duty, bringing
it down to 24 per cent, 16 per cent and 8 per cent and bringing
down the peak customs duty rate. Manufacturing is picking up, and
I will continue to promote it. We simply cannot be a service-based
One of the thrust areas of the Budget has
been fiscal consolidation. But what has the Budget done in terms
of cutting government's own expenditure or even restructuring subsidies?
On the fiscal consolidation front, we have taken
some steps. There is Rs 6,000 crore less expenditure this year.
We have taken three steps to reduce the government's debt-Rs 1,20,000
crore of debt will be recycled and lowered. Where will the benefit
go? It will help in fiscal consolidation. It is a matter of great
disappointment to me that the enormously beneficial consequences
of the debt restructuring have neither been recognised nor being
commented upon. On subsidy, we have a budget of Rs 50,000 crore-Rs
28,000 crore on food, Rs 12,000 crore-plus on fertiliser and Rs
9,000-odd crore on petroleum. Now you tell me where I can address
it? Petroleum prices are really dependent on the Gulf situation.
Food subsidy, I must sustain because it is drought-related.
How can we kick-start investment and capital
formation because as we can see, very little of that is happening?
That's true. It's a factor of instilling confidence
because after that it becomes contagious. Instilling confidence
and demonstrating success is the mantra. Then success becomes contagious.
So the key is instilling confidence and multiplying success.
Do you expect demand to trigger capital
Yes, I do want trade, industry and commerce
to stand up, seize the opportunity and move ahead. The finance minister
is a facilitator. There is much more confidence than before. Is
You have said that India's fiscal deficit
is no longer on the ascendant. Do you think you were conservative
in predicting a 5.6 per cent fiscal deficit and would you care to
Yes, because I do think production and growth
will be much faster. I have been very conservative both in my revenue
estimate, which I have brought down from 18 to 13 per cent, as also
in my growth prospects.
How do you ensure continuity in tax policies
in successive Budgets?
Again, I am not autonomous in this respect;
I am a servant of Parliament, a product of a system. I cannot make
a law. However, we have had a fairly stable tax system for long-from
1998 onwards. It is not good to play with rates like a yo-yo because
it affects the investor, the citizen. But how do you ensure continuity?
It's best when the changes are marginal. The country has to find
the optimal benefit rate-the rate of optimal balance between the
revenue-collectors and the revenue-payers. I think we are coming
close to that optimal point. So in future, the changes are going
to be marginal, not radical.
The Kelkar Committee on Direct and Indirect
Taxes has repeatedly stated that unless its recommendations are
accepted in toto, the benefits will be lost.
I can assure you that the benefits will not
be lost. I have taken on board almost all the administrative reforms
on direct and indirect taxes. And in indirect taxes, most of the
tax reforms too.
Last year Yashwant Sinha had touched on
a number of subjects related to the second generation of reforms.
But you seem to have completely ignored these issues. Do you think
that they are outside the purview of the jurisdiction of the Finance
My time is finite. My first speech was only
for 40 minutes but my officers said that you must add something
more and it became much longer. Despite that now you are saying
that you did not say this or that. I am not saying that it is outside
the purview of the Finance Ministry. But that in one speech, I cannot
cover everything. Labour reforms are still continuing and the issues
are being addressed.