'We do not expect bad times to last for long'

Soon after Finance Minister Pranab Mukherjee presented the Union Budget 2009-10, a finance ministry team led by finance secretary Ashok Chawla explained the challenges and philosophies that guided this year’s Budget. Excerpts from the interview:

What was the guiding philosophy behind the budget?
The finance minister has essentially focused on three challenges — of returning to high growth rates, ensuring inclusive growth and re-energising government. This boils down to reconciling short-term goals with medium- and long-term objectives. The short-term objective is to focus on growth, public spending. This has served as an automatic stabiliser in the last two or three quarters. Though growth has declined from 9 per cent, it has not come down as steeply as in many other countries. Spending is putting money in the hands of people, into the rural countryside so there’s more consumption.

The other short-term dimension is taxation. The finance minister has not raised excise or service tax rates, which were substantially reduced last year. On the medium- and long-term agenda, the finance minister has touched on four things: direct tax code, a new subsidy architecture for fertilisers, a task force for decontrol of oil prices, and disinvestment.

Why didn’t you announce a disinvestment target?
The finance minister has not articulated the position on disinvestment. The government’s intention is to sell government equity in listed public sector units. It is not necessary to spell out everything in the Budget speech. Disinvestment will provide a cushion to government finances if there are unforeseen expenses. ... It’s very clear that we would like to proceed with disinvestment. Two companies (Oil India and NHPC) are already in the pipeline. More companies will be identified by the department of disinvestment in consultation with the respective ministries. There’s no reservation on the government’s part; whatever number comes will be reflected in the revised estimate.

What is the roadmap for reducing the fiscal deficit?
A roadmap has not been laid out, but a document presented in the Parliament (under the Fiscal Responsibility and Budget Management Act, 2003) provides for a target of 5.5 per cent for 2010-11 and 4 per cent for 2011-12. The intention is very clear: the situation of a high fiscal deficit is not sustainable. There will be a rollback but it will take place in two or three years.

What is the inflation rate you have assumed?
We have assumed a WPI of 2 to 4 per cent this fiscal.

What is the revenue foregone in terms of fringe benefit tax (FBT) and commodities transaction tax (CTT)?
The revenue foregone on FBT is around Rs 10,000 crore. The CTT was not operationalised.

What is the revenue loss from continued cut in excise duties and service tax cuts?
The loss of revenue from indirect taxes is around Rs 30,000 crore.

The BSE benchmark index, Sensex, tanked 5.83 per cent or 860 points...
The Sensex looks at what’s in the Budget that impinges the stock market; the Budget looks at rural spending, infrastructure, education, health — the Budget has to address a much larger constituency than the markets addresses.