There is scepticism about government's
ability to contain fiscal deficit at 5.1 per
cent of GDP in FY13. A lot will depend
on industrial production which is currently
sluggish and if the present bank credit
off-take is any indication, it may not improve
for a considerable time.
Our ability to contain fiscal deficit at the
indicated level of 5.1 per cent in 2012-13
would, on one hand, depend on our
meeting the revenue projections for the
year and, on the other, on containing the
expenditure to within the budgeted levels.
We have taken into account the slowdown
in Indian industry and the difficult
external environment, while projecting
our fiscal balance for the year. I am confident that
we will meet the targets on both the counts.
How well prepared is India to tackle any eventualities
arising out of the US-Iran standoff
escalating into a war or the Eurozone issue
turning into a full-blown crisis?
We have factored these concerns to the extent
that is possible to do so at this stage. If additional
steps are required to be taken, based on
developments in the future, the same will be
taken. We must remember that the Union Budget
is not the only instrument for articulating
and implementing policies. Policy making is an
ongoing exercise. Suitable steps will be taken
as and when required, including to address the
eventualities that you have mentioned.
Do you think measures taken in the budget
are enough to contain current account
deficit? Don't you think the government is
depending too much on better performance
on the export front?
We have been successful in diversifying our
export baskets and our export destination in the
recent past. We hope to sustain and even
improve our export performance in 2012-13. We
have taken several other steps to attract capital
inflows into the country for bridging the
current account deficit. The import of
gold into the country is likely to moderate
with the introduction of import duty.
It has been the second largest item of
imports in value terms. Improvement in
domestic savings, especially financial
savings, will also reduce the pressure on
There is criticism that though the budget contains
a series of good interventions, it lacks
breakthrough ideas to kick start the investment
cycle and investor confidence in the
We have done what could be done through the
budgetary exercise. Besides, we will take other
steps in the coming days to improve business
sentiments so that private investments pick up in
the coming months. At the same time, the RBI
will be reviewing its monetary policy stance to
balance the need to support improved growth
with the required price stability.
There is a fear that government's net borrowing
at 4.79 lakh crore will crowd out the private sector. It may also keep the cost
of borrowing very high and as a result
most of the infrastructure projects could
become unviable. What is your opinion?
It is true that the net borrowing has gone
up in absolute terms from the revised
4.36 lakh crore in 2011-12.
However, the government's borrowings
have to be seen in relation to the size of
GDP. For 2012-13, we have pegged the
fiscal deficit at 5.1 per cent of GDP as against the revised estimate
of 5.9 per cent of GDP in 2011-12. Moreover, in consultation with
the RBI, we would manage our borrowing programme so that it
does not undermine the growth recovery in private investments.
I would also like to add that the Union Budget has taken several
steps to liberalise ECBs to improve the access of domestic
industry in selected sectors to have cheaper foreign capital.
This would help the industry till such times that the cost of
domestic capital declines with moderation in policy rates by the
RBI in due course.
Capping subsidy at 2 per cent of GDP is a welcome step. But the
fear is that you may ultimately end up in subsidising consumption
of agricultural produce at the cost of agricultural production i.e.
fertiliser subsidy. How are you going to guard against this?
We have provided adequately for the anticipated subsidies in the
Union Budget for 2012-13. On the issue of fertiliser subsidies, we
expect the Nutrient Based Subsidy (NBS) Policy to promote the
balanced fertilisation through new fortified products and focus
on extension services by the fertiliser industry. This will support
productivity improvement and improve returns for the farmers.
Though urea is not yet covered under this initiative, the policy is
expected to reduce volatility in the demand for fertiliser subsidy
in addition to containing the subsidy bill.
We are also putting in place a mobile-based Fertiliser Management
System (FMS) to provide end-to-end information on the
movement of fertilisers and subsidies, from the manufacturer to the
retail level. This will be rolled out nationwide during 2012. Direct
transfer of subsidy to the retailer and eventually to the farmer will
be implemented in subsequent phases. This step will benefit 12
crore farmer families, while reducing expenditure on subsidies by
curtailing misuse of fertilisers.
This is your seventh budget as India's Finance Minister. How
do you rate this budget in terms of efforts, constraints and
I have described this Budget as a step for regaining the growth
momentum with stability - stability on the prices front and on
macroeconomic front. It comes at a time when there is growing
uncertainty in the global economy. There are also some supply
side constraints in the domestic economy which are being
addressed gradually. I think we have done our best under the
current circumstances. I would be satisfied only when we have
the desired outcomes from these measures.