ET GBS: FM Jaitley says budget will be determined by resources, growth potential, tax buoyancy

NEW DELHI: Finance minister Arun Jaitley said the direction of this year's budget will be determined by the resources India has, the economy's growth potential and tax buoyancy. It won't be populist, he said.

He said there were arguments in favour of keeping the public spending tap open as well as maintaining the credibility of governance by sticking to fiscal deficit targets. A third view was: "Should you have targets at all that constrain you? In a fast-moving situation, government has the mandate to decide."

What the government decides will be revealed in the budget that's to be announced by him at the end of February, Jaitley said at the Airtel-Economic Times Global Business Summit on Saturday. "Spending has to go into areas of weakness where investment is required... (I) can't go for populism," he said.

The finance minister also addressed the point that Prime Minister Narendra Modi made on subsidies at the GBS in his keynote address on Friday. What the Prime Minister suggested was correcting the "imbalance in the discourse," he said.

"At the end of the day, the government is not against the concept of subsidies," Jaitley said. With more than a fourth of Indians living below the poverty line, these need to be directed toward making food supplies available to the poor and support for stressed farm sector.

"We are for rationalisation, not abolition," Jaitley said, adding that benefits need to be targeted toward those that need them the most. But this didn't mean giving unequal preference.

"The reality is that India needs a strong and powerful corporate sector and an equally strong and powerful agricultural sector," he said, adding that 55% depend on farming for a living. So, improving rural incomes would increase demand and help all-round growth.

The Prime Minister had asked why benefits to the poor and needy were called subsidies while those for industry were known as incentives or subvention.

Jaitley said India's relatively robust growth rate is an occasion for pride but some misgivings as well.

"When India is referred to as a bright spot, we feel happy, proud. Having said that we still have sleepless nights--we probably have a potential to achieve faster growth," he said.

India needs to grow at 8-9%, faster than the current 7%-plus, in order to eradicate poverty, he pointed out.

Jaitley reiterated that the government was against retrospective taxes, saying these had brought little by way of revenue but given the country a bad name and discouraged overseas investment.