We are not happy with the 8% duty on imports

To certain extent yes. My assumption is that these are challenges that the nation must tackle. We are prepared to sacrifice and work hard. Then only we will be able to solve all the difficulties. I feel it (the budget) has given incentives to infrastructure and agriculture and also laid emphasis on educationand road development.

Its failure is in curtailing non-plan expenditure including subsidies, government expenditure, improving the efficiency of the administration and promising and doling out to one and all on sundry. If the Finance Minister says we will finance the election expenses of all the candidates, the liabilities will be Rs 300 to Rs 400 crore. More so when you have elections almost every year. Fiscal scenario will deteriorate unless we make proper efforts to reduce government’s non-plan expenditure. We will be caught in an internal debt trap. In that we shall be borrowing money only for payment of interest.

All the industry associations have been complaining that the demand recession in the economy during the past few years have been mainly a fall out of the declining government expenditure. Is it not a contradiction that you are demanding further reduction in government expenditure to control fiscal deficit?

Government non-plan expenditure which is unproductive should be reduced. Whenthe government employees wages are going up or it employs more people efficiency is not improving. Similarly government subsidy has to be reduced. The poor constitutes a vote bank. The laws of economics are ruthless and relentless. You can very well generate more employment if the telephone directory is handwritten but it is not productive. Subsidies are also misused. Fuel subsidy, for instance, is not needed at all. It is not reaching the poor.

This budget has come in the wake of nuclear explosion and economic sanctions. Now rating agencies like Standard & Poor’s and Moody’s Investor Services have given their negative outlook on India. What is your assessment of the current economic situation?

According to me, it is necessary that we must increase productivity, push up reforms. If the same sanctions would have come in 1991 before the reform started, we would have found it very difficult to face it. Today because we have got so much of foreign investment, many of the American companies areimpressing upon the US government to go slow on sanctions. Our GDP growth rate has come down, fiscal deficit is mounting, inflation is touching up to 6 per cent, exports are rising at a very slow pace, the gap in the trade balance is widening. We cannot afford to be euphoric by just detonating a nuclear device. For becoming a strong military power, it is necessary that we become first an economic power.

Some of the steps in the budget are really good especially in the field of direct taxes. Concept of simplicity in administration and in law making, conciliation in the disputes with the tax payers and giving respectability to honest tax payers is quite laudable. I have seen people applying for share issue in 200 different names to avoid tax. That will come to an end.

Do you agree that subsidy is a necessary evil for any democratic government?

No. It has to be accelerated economic growth coupled with social justice. You cannot have social justice without economic growth. It is a necessaryimperative.

About the tax proposals, do you feel that the Finance Minister is trying to change the balance between direct and indirect taxes?

Indirect taxes hit large number of people without they realising it. Greater emphasis should be on direct taxes because it takes into account people’s ability to pay. To that extent I am happy, that instead of just increasing the rate which might have become an abortive move, he has tried to widen the tax base. If we look at middle class consumption of whitegoods like refrigerator, TV, Video, ACs in this country, the total number of direct tax assesses should be at least four to five crore. But only 1.2 per cent of the total population pay any taxes.

While direct taxes in the budget constitutes 15 per cent of total revenue in the form of 8 per cent corporate tax and 7 per cent Income Tax, indirect tax contributes to 34 per cent of the total revenue in the form of 19 per cent customs and 15 per cent excise duty. In most of the developed countries the shareof direct taxes in total revenue is more than the share of indirect taxes. Tax collections will go up. They have not gone down much.

Do you feel that the domestic industry will be protected by the 8 per cent duty imposed on imports. Will the focus on agriculture, small scale industry and infrastructure ensure industrial revival?

We are not happy with the 8 per cent across the board duty imposed on imports in the name of protecting the domestic industry. We had said that import should classified as three categories. Raw materials where duty should be lowest, semi-finished goods with slightly higher duty and finished goods where it should be high. Now the minister has put 8 per cent on all the 3 categories. It has hit even the raw material imports of Indian companies.

In Japanese economy the contribution of small and medium companies is 70 per cent of production. We are all for this (SSI) policy. Focus on infrastructure and agriculture will also help. I believe that the entire development ofGermany after the First World War was due to Autobahn road development. Indian agricultural production is next only to Brazil. Multinationals will invest in India if we develop our infrastructure. Agricultural products can reach the export market.