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The Rediff Budget Interview/P Chidambaram

'Sinha had the courage to reaffirm government's commitment to reform'

A couple of hours after Finance Minister Yashwant Sinha finished his Budget speech, Associate Editor Y Siva Sankar and Special Correspondent Onkar Singh met with Sinha's predecessor Palaniappan Chidambaram at the latter’s well-appointed apartment in New Delhi. Attired nattily in a pair of khakhi trousers with deep-blue bright-checks full-sleeved shirt tucked in, the bespectacled Chidambaram seemed excited at his self-assigned task of dissecting the Budget fineprint.

On his table are copies of official Budget papers -- quite a few books and booklets. Armed with luminescent highlighters, Chidambaram peruses the stuff, his eyes suddenly lighting up whenever he seems to spot some discrepancy or misrepresentation of facts. He highlights with glee at least five points in a minute.

His business card identifies him as a senior advocate at the Supreme Court of India. But today, he dons the role of a media darling with aplomb, what with television channels, newspapers and others vying for his attention.

An exclusive interview:

Industry has called it a dream Budget, a Budget rooted in reality. There are comparisons with your own dream Budget a few years back.

(Smiles). I sincerely hope that nobody pulls down this government in 30 days after the Budget. I think it is a good Budget. I think it has returned to the path of reform. I think it has taken some carefully calibrated measures.

What do you think is the most striking or interesting aspect about this Budget?

I mean, there's nothing striking. It has turned to the path of reform. Yashwant Sinha has had the courage to reaffirm government's commitment to the path of reform. He has acknowledged distortions which have crept in the last two, three years. And he has removed those distortions. For example, the surcharges, and the increases in the distributive dividend tax.

And he has recognised the critical areas which are fiscal correction and investment.

Do you think the Budget could have been better? Are there things which Sinha has not done?

Depends. If the prime minister had a freer hand, it could have been bolder. Better is a qualitative word. It could have been bolder.

Bolder? In which aspects?

Investments. There is not a word about foreign direct investment. There is no strategy to fight inflation which means you have to control expenditure. So there are areas where you require bold measures.

Well, the FM did mention FDI. Hundred per cent FDI will be allowed in non-banking finance companies or NBFCs up to $ 50 million.

Well, we are not talking about investments in NBFCs. We are talking about foreign investments in industries. He should have opened up sectors which still remain closed, removed all the sectoral caps, removed sectoral differences in FDI.

Something like 200 or 210 billion dollars are the annual flows of FDI and India receives one per cent!

What are views on the job market in the context of this Budget?

That is the political risk in the Budget. People will regard this Budget as not employment-oriented. But growth comes back to about 7 per cent. Or 7.5 per cent. It will throw up jobs.

Do you approve of the scrapping of the Banking Services Recruitment Board?

Yes. Because otherwise it is inconsistent with the granting autonomy to banks and privatising banks. If you are granting autonomy to banks, and eventually privatising banks by disinvesting your equity, then it is inconsistent to have a central banking service recruitment board.

Each bank must be allowed to recruit in the market on a competitive basis.

Do you agree with the view that government is really keen this time to downsize itself?

Not yet. I'm willing to wait and see whether they will implement their promises.

Do you think the fiscal deficit figure of 5.1 per cent of GDP is impressive and possible?

It is. Next year, they will come down to 4.7, according to his figure. This year, it seems to be bang on target although, I think, more accurately, he is slightly above target.

He has taken credit for Rs 25 billion which is not there. And the final expenditure figures may be slightly higher. The final revenue receipts may be slightly lower. But, let's assume, give or take half-a-decimal point, he is more or less on target this year… the question is, will he be on target next year?

The numbers are looking good. So I have to congratulate Yashwant Sinha for presenting numbers which look good.

Last year's divestment target was Rs 100 billion. Today, the FM has said only Rs 25 billion have been realised.

No, they have ended up with nothing. He claims he will get Rs 25 billion. He may not get it. If BALCO doesn't go through, he will get nothing.

This year, the FM's target is Rs 120 billion. A realistic target?

Depends. It depends on whether they are able to weather the BALCO storm. If yes, they can certainly get Rs 120 billion. Whether they can weather it, I don't know.

Rahul Bajaj feels divestment proceeds can be higher, anywhere between Rs 200 billion and Rs 300 billion

Well, Rahul Bajaj is not writing the Budget.

Part II: 'The Budget is not without political risks'

HEAR:
P Chidambaram on the Budget in Real Audio

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