Sinha refuses to roll back dividend tax hike

NO PRESSURE ON RBI: Sinha said he would not put any pressure on the Reserve Bank of India (RBI) to lower interest rates. Stating that it was up to the RBI to determine the timing for lowering interest rates, Sinha said, “I have no wish to interfere in the domain of the RBI. I have done my best in the budget and now the RBI governor and the board of RBI should determine lowering of rates and its timing… They have to now determine the direction the monetary policy should move in.”

Citing the steps taken by his government for creating an environment for softening interest rates, the Minister said, “I had brought down the interest rates on small savings and PPF by one per cent in January, and reduced general provident fund rate by one per cent in the budget. I have also abolished the interest tax. The only thing I have not accomplished is lowering of fiscal deficit… I have done my best and now it is up to the RBI governor.”

The Union budget, he added, has created a right atmosphere for the RBI to effect any changes in the interest rate regime. However, the Minister refused to comment on the alliance partners’ demand to roll back the 15 per cent increase in urea prices and subsidy cut on food.

Sinha stated that despite the fiscal deficit having soared to 5.6 per cent of the GDP as against the targetted four per cent, there was no reason to be over-concerned about India’s fiscal situation. The government, he said, is now aiming to confine it to 5.1 per cent in the 2000-01 fiscal.

Increased outlay on defence due to the 50-day Kargil conflict and advances to state governments for the 11th Finance Commission were cited the main reasons for the 5.1 per cent fiscal deficit target for the year. “These two provisions together add up to Rs 24,000 crore, that is 1.2 per cent of the GDP. If these provisions were not to be made, I could have contained the fiscal deficit at four per cent,” he added.

The industry’s apprehensions of excise, he said, have largely been addressed. “It is a movement forward. In the past two years, excise rates have been reduced from 11 per cent to four.”

Addressing the industry’s concerns that the government has failed to address the issue of expenditure control and downsizing of the government, the Minister said efforts are on in this front. “It is not realistic to expect the government to cut expenditure and downsize government overnight. We are working on these issues and we will continue to deal with expenditure with a scalpel… We will do our very best but I cannot specify as to when will I bite the bullet.”

Absence of a national consensus on disinvestment, Sinha said, was hampering the process of selling off government shares in public sector units. In view of these problems, the government had taken a conscious decision not to announce big ticket disinvestment in the year. “We could have announced big ticket disinvestment, but decided to announce a modest target and work towards exceeding it.”

He attributed the uncertainty at the Centre and the six months lost in electioneering process last year as reasons behind the government having missed its disinvestment target this fiscal. “Had we not lost six months, things would have been better… It is not going to be easy on disinvestment this year as well. We have to tread cautiously and achieve the set targets.”

He further reiterated that the government will not close down any banks but would recapitalise the ailing ones. “We cannot talk of privatisation of banks now and there was no way to prepare the country for closing down banks. So we decided to recapitalise the banks… I shall get this done through a Parliamentary legislation and ensure that the public sector character of these banks do not change.”