Union Finance Minister Pranab Mukherjee on Tuesday cautioned that the inflation rate could reach the two-digit mark in the coming months but gave an assurance that the government was taking all possible steps to protect vulnerable sections. He identified the three main objectives of the budget as price control, fiscal consolidation and expansion of the economy.
Replying to the debate in the Rajya Sabha on the Union budget, Mr. Mukherjee maintained that while there were other options, the government opted for hiking taxes on petroleum products in order to share the proceeds with States.
With the Rajya Sabha approving the budget through a voice vote in the presence of Prime Minister Manmohan Singh, Parliament has passed the Vote on Account and Appropriation Bills which authorise the government to withdraw money from the exchequer. The Lok Sabha approved the budget last week.
ADVERTISEMENT
On the tax on petroleum products, the government could have opted for the softer option of revising the administered price mechanism. But then the Centre would have deprived the States of their 32 per cent share in estimated net tax increase of Rs. 26,000 crore.
“I have to introduce the Goods & Services Tax (GST) in the next fiscal. Therefore, should I not have conveyed the message that I am moving in the right direction by carrying the States with me? Without convergence of views [between the Centre and the States), we can't have the GST. But I have taken care to ensure it won't affect consumers,” he explained.
But he acknowledged that the fallout would be a higher inflation rate.
ADVERTISEMENT
“I will not be surprised if it reaches double digit in March. But in the past we have lived with high rates. Yes, it is hurting people and is a matter of concern. We are removing supply bottlenecks and ensuring the supply of essentials at reasonable rates.”