Budget 2015: Needs of the poor will be fully protected, says Jayant Sinha

The government has delayed the fiscal deficit target by a year for the right reasons, Jayant Sinha, Minister of State, Finance, tells ET. Investors are more concerned about the quality of fiscal consolidation rather than a single number, he said. Excerpts:

The road map of fiscal consolidation has changed? How will foreign investors view this?

The early analysis is positive. Reason for that is that whether it is the rating agency or investors – everyone is more concerned about the quality of fiscal consolidation rather than a single number. We have been able to meet a very daunting and challenging target (reducing fiscal deficit from 4.7% to 4.1%). Frankly, I can tell you it was much more than 4.7% last year because of a whole host of reasons— refunds, money not paid out, outstanding dues. It was probably more like 5.5% or more, which was the actual number we were starting off with. And, then, we were given a target of 4.1%, which was important from the point of view of signaling to investors, debt markets, and the central bank. We went from 5.5% to 4.1% effectively.

Even as we were doing that we were cleaning up our books. We benefitted greatly from the decline in commodities prices particularly oil which has been a huge gift to the economy. So, that is what allowed us to take up this daunting challenge. There is a lot of credibility you establish when you stand up to the commitment to do that. It was within our means to go from 4.1% to 3.6%. But, what we felt was by taking that 0.3% of GDP extra and by putting that into public investment and jumpstarting the investment cycle, we would be able to create jobs and that 0.3% that we invested in infrastructure would be seen positively by analysts. It is a balancing act between growth and fiscal consolidation. My own sense is that while we have delayed the 3% target by a year (from 2016-17 to 2017-18) we have done it for the right reasons.

Hasn't the budget proposed a very ambitious disinvestment target? Will we see a different type of approach to disinvestment?

We have had notable success in terms of the Coal India share sale and we have been able to raise Rs 31,000 crore in disinvestment. Going forward (in the next fiscal) we are expecting about Rs 70,000 crore. The reason we should be able to get that is because one, the markets in India are quite buoyant and people are excited about assets in India. So, we should be able to get good valuations. Two, we are willing to be more flexible and open minded about disinvestment going forward. I am not going to say as to what, when and how we will do it. As and when we see a good opportunity and good valuation, we will consider.

Do you think that inclusion of the words 'strategic disinvestment' is critical?

There are many critical points and this is one of them.

The disinvestment process has always been a problem. We tend to delay things too much. Are you planning to change the process?

Of course we are planning a change in the process. We are trying to find how we can get the best price for our assets.

Do you think the department of disinvestment is equipped to embark on strategic sales or you are looking at an alternate model?

We are considering all kinds of approaches. Department of disinvestment is very capable in this regard and I have full confidence in them.

The interim report of the Expenditure Management Commission was with the government but there is not much clarity in the budget on what it seeks to do on rationalisation of subsidies…

We are very clear when it comes to subsidies. Food security, kerosene, fuel and fertilizer subsidy are extremely important for the poor. We absolutely want to make sure that the basic needs of the poor are fully protected. We will keep the level of subsidy but the issues of leakage and wrong beneficiaries have to be addressed. That is our approach towards subsidy reforms which is discussed in the EMC.

On the corporate tax front, will the government announce a clear road map regarding the phased reduction of rates from 30% to 25%?

It is going to be a consultative process. We want to have simple, predictable, fair tax administration. If we are going to go from 30% to 25% and do away with exemptions for corporates, we have to do it in a transparent and consultative manner over the next year. Our goal here is not to generate more revenue but to reduce discretion, litigation and inconvenience.

One criticism of the budget is that there's nothing in it for the middle class..

Like a lot of first reactions, it is misguided as far as data is concerned. We have increased the exemption on the personal income tax front. We now have Rs 4.44 lakh worth of tax exemptions. We raised the threshold for personal income tax from Rs 2 lakh to Rs 2.5 lakh in July. If you add both, you get around Rs 7 lakh. This is real money we have put in the pockets of the middle class. Secondly, the big payoff will come when the interest rates come down. Then EMIs will come down – on cars, housing loans. Three, we are doing a lot in terms of infrastructure and quality of life.

Finally, two most important things for the middle class are inflation and jobs. On both we have taken swift action. Inflation is down and we are doing the best we can for job creation. We are also giving more money to the states so they can be more responsive.