|"Today, the message we are
sending is different. We want to make this growth inclusive"
after he presented his fourth successive Budget, Finance Minister
P. Chidambaram's schedule was still chock-a-block.
Besides facing TV news channels that had queued up for interviews
one after another, his day was packed with meetings with industry
and business associations and other interest groups. Yet, Chidambaram
seemed visibly relaxed when he met up with India Today's Group
Editorial Director and
Business Today's Editor .
Unfazed by the lacklustre response to his latest Budget, Chidambaram
said the hype around budgets just media build-up. He was happy
that his Budget was able to keep the Indian growth story intact
and nurture the weaker sectors of the economy. Excerpts:
Congratulations Mr Finance Minister, for
your fourth successive Budget. Are you dismayed or disappointed
by the reaction to your Budget?
Whose reaction are you talking about? Are
you talking about the reaction of the corporate sector? I was
there with them this morning and they have forgotten what they
said yesterday and they sang a very different tune today. It is
a 'media created event'. I don't blame the media; they are perfectly
entitled to do that. The point is, you must understand that Budget
has a context, it has an economic context and it has a political
context. Ten years ago, we had very different dreams. The dream
was to plug India in with the rest of the world, and tell them
that we are ready to open up and become part of the global economy.
Today, the message we are sending is quite
different. We have growth that is not cyclical. We now want to
make this growth inclusive. We are sending a message-to India,
that we want everyone to be a part of the growth story of India.
That (in 1997) was one kind of dream, this is another kind of
dream. It was my good luck that I was part of that dream and I
am part of this dream as well. But this Budget addresses different
This Budget also addresses a different
challenge. Inflation has been worrying this government. You've
tried to balance sustained high growth, rein in inflation and
at the same time, tried to make growth inclusive. How tough was
This is a new kind of challenge for India.
India has not had a period of sustained high growth where that
growth, to some extent, has been clouded by inflation. The last
time there was high inflation in this country was in 2000-2001,
which is apparently simply a memory even for the people who were
in the government at that point of time. For 48 out of 52 weeks,
inflation was above 6 per cent, for 22 of those weeks it was above
7 per cent, for 12 of those weeks it was above 8 per cent. They
had low growth and high inflation, how could they address this
issue? Today, we have high growth and inflation around 6.5-6.6
per cent, and we are genuinely concerned. We believe that we can
moderate inflation without affecting the growth story. But as
the Prime Minister said yesterday, what we are trying to do is
to maintain high growth while moderating inflation.
|"If you take the view that
ESOP is a fringe benefit, which it is, then it is a right
You are saying that inflation is going
out of control, so who do you think is responsible-the trading
I can only tell you what is responsible. First,
the monetary aggregates. Credit growth is 30 per cent, money supply
growth is 21 per cent, foreign exchange inflows are very, very
robust. So, the monetary aggregates are putting pressure on the
monetary side. Secondly, global commodity prices, which have been
very high and are impacting Indian commodity prices. The third
reason is completely unexpected-supply-side constraints. One year
you have sugar, one year you have wheat, one year you have pulses...
but this year all of them have come together. Sugar was the first
trigger point; we moderated it when the first sugarcane crop came
in. But then we had wheat, add to that pulses, add to that edible
oil, all coming together...
Tell us frankly, is this your Budget?
Yes it is.
And you are happy with the Budget?
Of course, I am happy with the Budget, I will
But some of your allies aren't very pleased.
I can't speak for my allies, all I can say
is that this government has faithfully adhered to the National
Common Minimum Programme. We have spent more money on agriculture;
we have put more money into education, more for healthcare-Polio,
HIV/AIDS. We have put more money into social security; we have
put more money into seeds and water management. I can give you
a whole list of things; I can read out the list if you have the
But there is no 'Big Bang' in the Budget.
I'm sorry, the Budget can only provide the
bucks. The bang has to come when the bucks are used to deliver
In the past you have spoken about moving
to a tax regime that is simpler, with lower rates and no exemptions.
At a time when your revenue collections are the most buoyant,
wasn't this the time to do something like that?
We have done so. We have removed several exemptions.
And we have also rationalised several taxes, Section 36 (1A) has
been rationalised, several exemptions that were expiring on March
31 have been allowed to lapse. We have done it.
But the education cess is going to impact
The education cess is a universal demand.
Show me one person who says they won't pay it.
But have you been able to spend the money
that you have collected?
Of course, the money has been transferred
to a non-lapsable.
Non-lapsable perhaps, but have they spent
Look at the numbers... the Ministry of HRD
has spent all the money that it was allocated.
But money was collected for Tsunami relief
The Tsunami money was to be spent by the state
governments. The state governments haven't spent the money that
they were given and all I can say is that I am sorry. But look
at the hrd numbers. A sum of Rs 17,128 crore was given and they
have spent Rs 17,126 crore. I am very happy with the way HRD has
spent the money allocated to it.
|"I am happy that I have been
able to do something for children, dropping out of school..."
You have said that you are happy with the
way the money is being spent, but what about the outcomes?
The outcome budgets will be presented by the
respective ministries to Parliament. This year, I have had a meeting
with them and I have impressed upon them that the quality of the
outcome budget must improve over last year. It is a new experiment
and I think that they are now competing with each other to present
a good quality outcome budget.
You talked about focussing on healthcare
and the social sector with a lot of measures, but the delivery
systems are still a matter of concern. Ultimately, we find in
a lot of cases that the money doesn't really reach the beneficiaries.
Is that an issue that can be addressed in
the Budget speech? It cannot. It is part of the governance system.
I said so in my speech quite candidly. I said there is no dearth
of funds, there is no dearth of schemes, what needs to be done
is to deliver the intended outcomes. How much more candid can
a Finance Minister be? This is part of the governance structure
in this country-Central governments, state governments, district
administration, panchayat. Money has to be spent down the line.
Obviously, these are matters that cannot be addressed by one person
in his speech. These are to be addressed by systemic changes in
the governance system.
But in the absence of such systems, pushing
What do you want me to do? Put the money away
in the bank? It is intended for agriculture, education, health
etc., and we give the money and we try to improve the governance.
What do you want me to do? Just because we have some leakages
and some wastage, we can't hold back and say we won't give the
What would you then say is the big idea
behind the Budget this time?
The big idea behind this Budget is, I think,
that the growth cycle, which is now visible, is not a cyclical
shift, it is a structural shift. The message is: Now that we seem
to have got into a higher growth cycle, let us then distribute
this growth to a larger section of our people. And the most deserving
sector of our people is the most neglected so far, and that is
the farm sector. And, therefore, more money is being pumped into
the farm sector. The other sectors that have been asking for more
funds-health and education-have been given more money. The message
of this Budget is, growth is happening, let us become more inclusive.
Let the gains be distributed to more sections.
But aren't you being a bit conservative
about growth in the coming Budget? Your revenue targets seem to
be a bit lower than last year's?
That is not correct. All of you, wittingly
or unwittingly look at the re and then the be. Budgets are not
made that way, Budgets have always been made on be to be. And
if you take that, last year I had Rs 442,000 crore and this year
Rs 548,000 crore, a good Rs 106,000 crore increase, which is a
20 per cent increase. And that is not a conservative, not a pessimistic
assessment. That is a very aggressive assessment.
Many sectors expected more from the Budget.
We have been talking about making India a small car hub globally
and automakers expected cuts in excise...
We addressed that issue last year when we
brought down excise duty from 24 to 16. Are you suggesting that
we bring them down further this year?
Yes, but that was only for a certain category
Only for small cars, we said that we will
make India a hub for small cars. And the industry thanked the
government for that last year.
But this year the industry responded by
Raising prices is a sum of many factors. Demand,
input costs and other factors. The fact is, hasn't India become
more of an exporter of small cars than it was in the past? The
answer is a resounding yes. More cars were exported out of India
in 2006-07 than in the previous years, because they got a huge
benefit from the 8 per cent excise duty cut.
There is the issue of capital account
convertibility, do you think the time is right for that?
The report says, fuller convertibility, not
full convertibility. Except for some countries, and even they
have some sort of capital controls (no one offers full convertibility).
What we are trying to move towards is fuller convertibility, where
the glass is fuller and fuller. As we reach the parameters for
inflation, for reserves, for deficit, we will take steps towards
You have imposed Fringe Benefit Tax on
ESOPs and fast growing companies are concerned that this will
add to their costs of retaining people by giving them ESOPs.
You see there is a logical way to proceed.
Is ESOP a fringe benefit or not? If you take the view that ESOP
is not a fringe benefit, then it is a wrong tax. But if you take
the view that ESOP is a fringe benefit, then it is a right tax.
Undoubtedly, ESOP is a fringe benefit and must be taxed.
Would you have done more in this Budget
if you could do so?
(Laughs) Whatever I wanted to do I have done.
I am very happy I have been able to do something for children
leaving Class 8 and then dropping out. I am very happy I have
been able to do something for the physically challenged, I am
very happy I have been able to do something for groundwater recharge.
I am happy for what I have been able to do for HIV/AIDS, Polio.
These are very important concerns for me, concerns which are close
to my heart. I have always spoken and written passionately about
HIV/AIDS, Polio and the physically challenged and I am happy that
we have been able to do something about that this year because
we have the money. I could not have done it a couple of years
What I meant was, if Congress had the single-party majority
would you have done it before?
That is not the way to look at it, I am bound
by the NCMP, if the Congress party was alone in majority I would
be bound by the Congress party's manifesto, and as I said last
year that when I took on the job, I knew I had to do the NCMP.
Everything that has been done in this Budget is consistent with
the NCMP. Today, we are the UPA government, we have the NCMP and
I am the Finance Minister of the UPA government.