High domestic and global prices still pose inflationary threat
NEW DELHI: Rebutting the charge by India Inc. that the Union budget ignored the corporate sector, Finance Minister P. Chidambaram on Monday defended the proposed farm loan waiver scheme in the name of food security, saying high domestic and global prices still posed an inflationary threat.
“One of the reasons why inflation is still a threat is food price in India,” he said during a post-budget interaction with industry chambers here.
“If we grow enough food to feed our people, we are insulated from world prices, but if we are dependent on imports we are subject to world prices,” he said, noting that after a long gap, India had become a marginal importer of foodgrains, which was a dangerous omen. “No country with as large a population as India can be dependent on imports [of foodgrains].”
Buttressing his point, Mr. Chidambaram noted that since April last year, the global prices of wheat and rice had risen by 88 and 15 per cent. “Taking all this into account, we came to the conclusion that the distress of the farmers calls for an unorthodox response. And the response was farm loan waiver.”
Referring to the corporates’ charge, the Minister said: “I have not forgotten the corporate sector. Despite the advice given by my Chief Economic Adviser and the suggestion in the Economic Survey, we accepted your demand for retaining peak customs duty rate.” The corporates would also indirectly benefit from proposals such as excise duty cuts and relief given to personal income-tax payers as these, in turn, would spur demand for consumer goods.
The Central Sales Tax, a levy on inter-State sale of goods, was also proposed to be reduced from three to two per cent in the next fiscal. Besides, the budget sought to lift the tax deducted at source (TDS) from listed corporate debt as also avoid double taxation on dividends paid by domestic companies and their subsidiaries.
A number of tax sops were provided to the hotel and hospitality industry. “What we have done is sufficient to keep the engine of growth running at full speed …You have my word that if any sector faces difficulties, if there is any signal that growth is flagging in some sectors, government will certainly step in and try to see what can be done to that sector.”
Noting that the effective corporate tax still worked out to 20.6 per cent compared to the prescribed rate of 30 per cent, excluding the surcharge and education cess, Mr. Chidambaram assured the captains of industry that he would address their specific issues. However, “there is no scope of rewriting or revisiting the basic philosophy of the budget.”