New Delhi

Farm loan waiver for food security: Chidambaram

NEW DELHI: Rebutting the charge by India Inc. that the Union budget ignored the corporate sector, Finance Minister P. Chidambaram has 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.

In particular, some of the lagging consumer goods sectors such as two and three-wheelers, cars, buses and their chassis and paper products were given much deeper cuts in excise duties to revive demand. Alongside, with the reduction in specified customs duties, the entire package of tax reliefs would directly benefit the corporate sector, he said.

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.

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.”

On the turmoil in the stock markets, he pointed out that Asian markets slipped because of fears of recession in the U.S. “What is happening in India shows that we are not as decoupled as we think we are … I don’t think we need to worry too much about that. This is really reflecting what is happening in the world market.”

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