Excerpts from an interview with Finance Minister P Chidambaram on Thursday-

The main worry that the world and India have in this Budget is the lack of any element of reform in it. Is this government committed to pushing the reform process forward?

I don't know what your definition of reform is. If you are talking about the liberalisation of the economy, the economy includes agriculture and agriculture cannot be liberalised or liberated unless the farmer is happy. We are producing enough foodgrain and other commodities for the Indian people.

In earlier years, we addressed the concerns of industries and services. This year we left them almost alone, because they are virtually on auto-pilot.

Both sectors are clocking double digit growth rate quarter after quarter. And if you were present at the chambers meeting this morning, they sang a very different tune to what they said to you on television yesterday.

Everybody says there's not even a whiff of liberalisation for the industry or the services in the Budget.

I don't agree. Read the sections on banking, insurance, capital market, innovative financing for infrastructure. Secondly, if the farm sector grows, the direct beneficiary is the industry and services sector.

Chidambaram, your Budget numbers seem to assume slower economic growth next year.

The nominal GDP growth is about 13 percent. That's not slow. Please remember, Budgets are based on BE (Budget Estimates) to BE. What happens during the year could be a one-off, could be because of certain unanticipated developments. But year after year, Budgets are made on BE to BE. And BE to BE, we have assumed a 13 percent growth rate.

The economic growth is an average of 9 percent in the last two years; do you expect a 9 percent GDP growth next year as well?

We are assuming a nominal growth rate of about 13 percent of GDP.Last year we assumed 12 percent of GDP. Taxes are not predictable. I cannot say I will collect this much this year.

In the exercise of tax collection and tax administration .anything could happen in one sector of industry or another. Monsoons could fail. There are so many imponderables. We are assuming BE to BE 13 percent this year, which is more than last year.

You have done things to make the stock market go down.

I can understand why media channels focus on the stock markets. It's one market. It is an important market.

The net impact of your proposals is that the tax burden has increased. Some companies will now be paying 40 percent of their income as tax. Education cess and dividend distribution tax.

It's not so. The dividend distribution tax is a surrogate tax. It has to be paid by shareholders. You can't add that to the corporate tax. The marginal rate for an average shareholder is 20.

We have kept the dividend distribution tax at 15, which is nowhere near the marginal rate of 20. So you are still paying a surrogate tax, which is less than what you pay when the dividend has gone into his hands.

The only addition to the corporate tax burden is the one percent education cess. That applies to all tax payers in the country, including you, if you buy a pair of shoes or a jacket.That's to mobilise funds for higher education. What's wrong with that?

Why put a fringe benefit tax on Esops? Esops are seen as rewarding employees, a re-distribution of wealth.India is the only country to have this.

That's not correct. Australia and New Zealand also have FBT. If you take the view that e-sops are a fringe benefit, it must be taxed. EsopS is given to keep an employee with you. It's an addition to the compensation package, or is it not?

Should we expect reforms in insurance and disinvestment outside the Budget, when there is not so much media glare?

The banking and insurance bills are pending in Parliament. I said we will introduce the insurance bill, the micro finance bill in this session. We are not going back on any reforms. What happens to the bills in Parliament is not in my control.

What have you done in this Budget to control inflation?

Three steps have been taken: fiscal, monetary and on the supply side. In fiscal we took steps in January and we are taking steps now. the customs duty, the excise duty. Monetary steps are taken by the RBI.

On the supply side, a number of steps have been announced. I am addressing the issues that impact the supply side, like credit, water, power, seeds, and fertilisers. There is a sincere effort to lower inflation. We are assuming 13 percent nominal GDP growth, we are hoping to keep inflation between 4 and 5 percent.
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