The rich should be ready to pay more tax: Chidambaram
The Finance Minister is positive that next year's fiscal deficit target will be lowered to 4.8 per cent.
New Delhi: Union Finance Minister P Chidambaram is on a roadshow meeting foreign investors to sell the India story. Talking to CNBC's Sri Jegarajah he said that the reform measures will help the country lift off the negative credit outlook. The Finance Minister has been instilling a lot of confidence in not just the markets but investors as well. Adding that this year's Budget will be a responsible one, he is positive that next year's fiscal deficit target will be lowered to 4.8 per cent. Chidambaram also said that tweaking tax rates may be required to address economy.
Here is a transcript of his interview:
Q: What is your fiscal deficit target for FY14 Budget?
P Chidambaram: If I show on the February 28 that we have kept the fiscal deficit below 5.3 per cent and if my Budget estimate show that next year's fiscal deficit will be below 4.8 per cent. I can show a healthy growth in revenues over next year, that is the time when ratings agencies should consider moving us to improving the outlook.
Q: I get the sense that the Finance Ministry feels that it has done its bit to try to cure the deficit and the ball is now in the court of the Reserve Bank of India (RBI) meet on January 29. Is a 25 basis points cut guaranteed?<
P Chidambaram: I don't know. The ball was always in the court of the RBI, the Finance Ministry or officials in the Finance Ministry express their views, we are naturally biased in favour of growth. The RBI has an obligation to contain inflation. They are not necessarily contradictory positions. They can converge and when they converge the governor will take a call. I think the governor is sensitive to the fact that just as high inflation penalises the people, low growth also penalises people. Low growth means fewer jobs, lower incomes, fewer self employment opportunities. I am sure the governor will bear all these in mind when he takes a decision.
Q: The Prime Minister has said that the five year plan for 8 per cent growth on average is ambitious in his words. Does that suggest that India is in for a period of sustained growth?
P Chidambaram: Last plan we achieved very high growth, nearly achieved our target, we didn't touch the target. We started out by saying this plan, in 2012-2017 we must have a growth of 9 per cent, we scaled it down to 8 per cent. Eight per cent is challenging, so he used the word ambitious but I think we should be able to achieve 8 per cent growth say in the third year of the plan.
Q: Will the General Election have an any bearing on FY14 Budget?
P Chidambaram: I don't think a Budget is drawn by keeping an election in mind. The election is a good 14 months away from the Budget. The Budget will be a responsible one.
Q: What kind of taxation are we going to see this year?
P Chidambaram: The tax rates that are announced in 1997 have remained and have survived four governments and four finance ministers. I believe in stable tax rates. However, I must concede that there is an argument, underline the word argument, that when the economy requires, government requires more resources, the very rich willingly should pay a little more. That is not to say that tax rate should not be stable. I think we should have stability in tax rates but we should consider the argument that very rich should be asked to a pay a little more on some occasions but that is not the view I am expressing. That is simply the argument I have heard and I am repeating.