A little rice and two kababs. That was Finance Minister Yashwant Sinha's lunch after presenting his fifth budget to a relatively calm session in Parliament. His sparse meal might have had something to do with the fact that he had a series of tough interviews lined up for the rest of the day, interviews where he was repeatedly asked if he had done enough to revive a sluggish economy. A former bureaucrat who's familiar with opprobrium, Sinha, 64, took a break after his lean meal to sit down for an interview with BT's Special Correspondent Ashish Gupta at the finance minister's sprawling bungalow in the green heart of Lutyens' Delhi.

Q. The Economic Survey talks of a double-whammy faced by the economy today-high fiscal deficit coupled with a falling GDP growth. How do you plan to address this major problem?

A. I have tried to address the twin problems in my budget by not being unrealistic as far as the fiscal deficit is concerned, nor (have I) gone for any adventurism. That is why the fiscal deficit has been pegged at 5.3 per cent of the gross domestic product in this budget. I have given larger allocation for planned expenditure, which will lead to greater government spending. We have also set up arrangements for the private sector in order to encourage investments in the infrastructure sector. And with all this, and the push that I am giving to the rural sector through larger allocation, I am sure that the demand factor and the investment factor will pick up, and things will improve.

The Economic Survey talks of the problem of demand, but you seem to have burdened the middle class with more taxes, so where will the demand come from?

No I have not really burdened the middle class. All that I have done is to add 3 per cent surcharge. And about the demand from the middle class-I am sorry, the demand does not come from the middle class. Last year, I had given lots of tax breaks to the middle class, but demand still did not pick up. So why did demand not pick up if this theory is right? Demand depends on a number of factors. It must come from the rural sector, where 70 per cent of the people live. And, therefore, I have concentrated on the rural areas so that infrastructure develops there, productivity improves, and the demand from the rural sector picks up. If 70 per cent of the people start demanding more goods and services, the economy will.

"Tell me, what is in my power? The budget belongs to the government, it is not the budget of the finance minister alone"

But there is a belief that the rural population does not really have the purchasing power?

That is exactly why the purchasing power has been provided to them. I am trying to do just that.

You haven't mentioned your growth expectations for next year?

That, I think, no fm, in any budget, has ever indicated: that I expect 6 per cent or 7 per cent growth. Neither have I ever done so in my previous budgets, nor has any other fm. I leave it to the economists to make the prediction and later prove them wrong.

Last year, your budget was hailed as a landmark budget, but this year the response seems to be much more muted? Why do you think this happened?

Well, last year's budget was quite different because I took the opportunity to comprehensively set the roadmap for the second generation of reforms. And, therefore, there was much applause for the budget. This year the second generation of reforms has already been set. That is why I have talked of consolidation. You can't have a set of reforms every year. But you will notice that this year, other than agriculture and infrastructure, we are looking at another very important area of development-urban development. This is the first time that we are concentrating on urban development. This is a very major initiative.

You will agree that the implementation of more second-generation reforms lies with the states rather than the Centre. So, what role does the budget have in such a situation?

You are absolutely correct. As far as the role of the budget is concerned, I have clearly spelt it out in my budget. I have talked of the fact that there is something like over Rs 14,000 crore that is now available with the Government of India to help the states in a reform-linked programme. This is the manner in which incentivisation of states take place. How do you persuade the states to take to reforms? By dangling a carrot in front of them. And that's exactly what we are doing. If you reform you will get more funds.

There is a lot of criticism that you promise a lot of things, which you cannot actually deliver because they are outside the purview of the finance ministry?

Tell me, what is in my power? We were just talking about the legislation in the banking sector-it talks about bringing down the government's equity in public sector banks to 33 per cent-which I have introduced in the House. It is now with the standing committee of Parliament. Is the banking sector within my power? So the budget is the budget of the government, it is not the budget of the finance minister alone. Therefore, the budget has to talk about all sectors. Otherwise I can just get up and say that this much is the revenue, and this much is the expenditure, and this is the budget.

So what is a budget? Is it merely a statement of account or a roadmap of the future?

Last year's budget has clearly laid down the roadmap of the future. But you don't lay down roadmaps every year. And we are following that roadmap. And it will be our endeavour to implement it as speedily as possible.

How do you take care of your biggest bugbear-the fiscal deficit-in an economy that is clearly in a slowdown?

In the usual way. The only planning that we have to do is to ensure that our revenues pick up, and that our expenditure continues to remain under control. And that is what I have demonstrated in this budget. I have managed a saving of around Rs 11,000 crore in the expenditure budget. It is a very significant amount, which has considerably softened the blow of revenue shortage. I am being accused of revenue shortfall. But the revenue shortfall is largely on account of the tax concessions that I had given last year in my budget.

Aren't the FM's hands tied as far as indirect taxes are concerned? What do you do if there's a sudden fall in oil prices or global recession?

You are right. No fm has that kind of control. I don't have control over international oil prices. So, if international oil prices go up or down because of their own reasons then I can't say that they must remain at $20 or $10 a barrel. Those are risks that every fm has to take while framing the budget.

Don't you feel that the role of the budget and the FM in setting the economic agenda for the nation is decreasing?

I don't think so. Left to myself, I think that the Part B of the fm's budget speech (it occupies 36 pages in Budget 2002) should be one-page long. Because everything will be so set that people do not expect lots of ups and downs in the budget. It should be stable as I have said. It should be rational and there should be an assurance in the minds of the people as to what is going to happen and what has already happened. There should be no excitement from that point of view.

What about all the secrecy that is linked with the budget? Do we need that?

The secrecy bit of the budget, as I have said, will go when Part B of the budget is reduced to one page. Then there will be no need for secrecy. Once you have fixed 10 per cent and 20 per cent for customs duty, once you have fixed 16 per cent for excise duty then there is no need for secrecy.

So does that limit the FM's options for next year's budget?

No, it is not getting limited. It is only getting better. In fact, it is improving. And, therefore, in an improving situation where the market takes an autonomous course, you will find that the role of the government changes-for the better.

Critics point out that you have taken the softer route by reducing interest rate on small savings.

Tell me, what is the other route?

The other route is to drastically cut down on your expenditure.

But I cut my expenditure by Rs 11,000 crore. Now what is the other hard route? The rate of inflation today is 1 per cent. And people expect to be paid 10 per cent on their small deposits-a 9 per cent real rate of interest.

What has the budget done to help business sentiment?

Business sentiment will have to help itself. I have done whatever I wanted to do. Now it is up to the business sentiment to respond.