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‘Markets expected too much’

In an exclusive interview to Lok Sabha TV,finance minister Pranab Mukherjee spoke on a range of issues including why it was not possible to announce a disinvestment policy in the Budget as well as why a fourth stimulus wasn’t declared. Excerpts:

In an exclusive interview to Lok Sabha TV,finance minister Pranab Mukherjee spoke on a range of issues including why it was not possible to announce a disinvestment policy in the Budget as well as why a fourth stimulus wasn’t declared. Excerpts:

•The most significant part of your excises have been aimed at getting back to 9 per cent growth. What would be the roadmap initiated with this Budget?

I have taken tremendous risk to create fiscal space for having higher deficit. I could have gone for the more conservative way of reducing deficit and had six per cent growth. We revived the economy from a very difficult situation. Today the situation is very different.

•It is not clear from your speech how the gap will be financed. You said that the direct tax revenue is going to be flat.

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Additional market borrowing details are in the budget papers.

•You’ve not talked about divestment of public sector enterprises.

I have given the philosophy of disinvestment. It will happen in due time. It is perhaps one of the things that the market expected to be announced,that is not possible. No finance minister can do it in the budget, it will be done with people’s participation.

•Why do you think the markets have reacted negatively?


I am also yet to find out the reason but I am told that for the last one month,there was a lot of hype and,in the expectations,we forget the reality. Perhaps,markets expected too much from the FM to do at one go. But that’s why I said in my speech that one budget speech is not going to address all the problems and that is not the only instrument through which problems can be solved. It could give a broad vision which we have given.

•So there’s no future stimulus package as the industry,perhaps,was expecting?

No,we have given a theme. But,certainly we will look into it. Certain components of the major stimulus features have been provided. Another was the public expenditure,third was the monetary policy,where we reduced interest rates. After my talk with the public sector banks,you have seen that almost every bank has announced a reduced interest rate.


•So infrastructure and other expenditure is going to lead to the demand-led growth.

I am expecting to have a demand led growth.

•Is the Budget for a short-term but planning for a very long term?

Of course.

•What are your expectations of the rate of growth that we might achieve at the end of this fiscal given the kind of provisions that you’ve made in the Budget?

I don’t think it will be less than 7 per cent.

•You’re hopeful of achieving 7 per cent and thereafter going up to 9 per cent in the next financial year hopefully?


Not in the next financial year,but my target is to reach there as fast as possible,at least 8.6 per cent. I would like to achieve 9 per cent but the average growth rate we’ve had must help.

•You have been saying that the turnaround will come by end of third quarter.


Unless there are visible improvements in the international scenario,it would take a bit longer.

•What direction are you envisaging in direct tax reforms?


First of all I’d like to do away with the plethora of exemptions. I’d like to make the tax law simple. Rate of taxes will be low,voluntary compliance will be more,income tax returns submission would be simple. I have asked them to work on Saral 2 forms.

•Many people say that increase of fuel prices before the Budget has enabled you to escape criticism

No it is not that. The Budget has nothing to do with it. The government is providing a service and is charging for that service.

•What about the expert group for petroleum pricing.

For the last five years,we have adjusted the prices only twice or thrice and they’re too small,I must say. Our diesel subsidy is Rs 16 per litre,per cylinder it is Rs 92. So what I want is,for a proper mechanism an expert group should give its recommendations.

•Overall how would you rate the Budget? How satisfied are you with what you have achieved?

I am very dissatisfied. I am never content with what I do. It is for the people to see. Yes I have left a huge fiscal deficit no doubt but with the objective of having adequate money to inject into the system,to help the productive sectors and lead the economy to demand led growth.

First published on: 07-07-2009 at 06:12:07 am
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