Increasing taxes was not on the table: Finance Minister

Finance Minister Nirmala Sitharaman has said that increasing taxes for ordinary Indians in the budget was not an idea she was willing to consider. In her first post—Budget interview to a private television channel, she told Network18 Group Editor-in-Chief Rahul Joshi that had the government had more resources, she would have shared it with taxpayers in the form of lower taxes.

“I certainly didn’t want to fund this through taxation. That is why I have provided for large borrowing, disinvestment, asset monetization,” she said.

The stock markets have reacted with glee, giving Sitharaman the biggest budget-day rally of the twenty-first century. 

In her third budget, she announced plans for large-scale privatization and monetization of public sector assets, recapitalization of banks, higher foreign investment limits in insurance and reform of electricity distribution.

The higher borrowing, she said, would not affect the government’s fiscal prudence, which is on a glide path to 4.5% of GDP in FY26. This would not be a cause for concern for India’s sovereign ratings.

“I don’t want to say I am not bothered. But I don’t want to let it bother me,” she said of the likely reaction by ratings agencies to the borrowing plan and higher fiscal deficit estimates, pegged at 9.5% of GDP for FY21 and 6.8% of GDP in FY22. “I am confident that this will be appreciated by the people who matter.”

The finance minister made major announcements in her conversations with Joshi:

—A new law will be passed that will have a provision for private development financial institutions to fund infrastructure projects. 

“There is so much demand for development financing.”

—The government is not in the business of doing business but governance, she asserted.

“I am still saying—bare minimum even in strategic sectors,” she said in reference to public sector participation in business.

—The government is committed to privatization of two banks and one general insurance company this year. It has started engaging with the Reserve Bank “in a big way.”

“Is it right to pour taxpayer money into banks?” that cannot stand up on their own,” she asked.

—A holding company with some government participation will be created to own the bad loans of banks. This company will then call for interest from private sector asset reconstruction companies to sell non-performing assets.

“This is a workable solution. The banks are all on board.”

—She clarified that the Agriculture Infrastructure Development Cess would be carved out of additional excise duty which is owed to the central government. “The end consumer or the importer is not going to pay one rupee more.”

The finance minister asked farmer unions to return to the negotiating table in a spirit of goodwill and explain their points of difference on the farm reform laws. “Some of whom are farmers are misguided. Please talk on particular points of concern. We are willing to concede,” she said.