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'Spend, but create assets, spend but make sure that people benefit from it.'
'This has been a beautiful guiding principle. And I think as a finance minister I owe so much to the prime minister for keeping this path clear before us.'
A day after presenting the Union Budget for 2025-2026, Finance Minister Nirmala Sitharaman spoke to Ruchika Chitravanshi, Asit Ranjan Mishra and Nivedita Mookerji/Business Standard on issues ranging from the theme of the Budget to income tax relief and challenging geopolitical environment.
Part two of a multi-part interview:
What is the rationale behind putting Rs 12 lakh rebate figure? There's this view that taxable income in any developing country is almost twice or thrice the per capita income for that country.
Now with Rs 12 lakh, India has become a bit of an outlier, where it is almost five times the per capita income.
First of all, if you're pointing out that India is an outlier in doing this, India is also an outlier in the fact that of the 1.4 billion population, 80 million are taxpayers.
If I have to constantly work on only logical ways in which other countries have handled (taxation), I will never be in a position to give any relief to any taxpayer.
Does that justify that 80 million people who are in the tax net today are the only ones who will have to bear the burden of the growing demand for revenue? My revenue requirements will have to grow.
But does that mean that I shouldn't pay attention to widening the net? And does that mean that I'll have to keep everyone (in the tax net) despite the fact that the living standards are different today, cost of money is different today.
Inflation is persistent, probably because of imported inflation.
Has there been a change in approach in the Budget from more capital expenditure to more money in the hands of the people?
No, there's no change in approach. As I have been saying since 2019, we have been honouring the taxpayer. I've even listed the things that we've done.
Take Vivad Se Vishwas, where 'faceless assessment' has been brought in.
'Faceless' is there in appeal too. For every consultation that we do on GST or direct taxes, we talk to people.
Our continuous attempt is to recognise taxpayers, and clearly tell them about their contribution.
It has been going on. And, therefore, this time, we've also done this.
Perhaps the question is being raised because there's the thinking that the government is shifting from supply-side economics to demand-side economics by giving more money in the hands of the people through a tax cut.
Do you agree?
This may be a consequence. But my objective is to make sure that the voice of the people is heard and recognise them for their contribution ... Capital investment has not come down.
It has gone up from the Revised Estimates. How can we say that there's been a shift from capital expenditure?
Money going to states has increased this year over last year. What is the thinking behind this?
If it is inclusive of the grants in aid, it will be. And what is coming out of the Finance Commission's recommendations, we will continue to do.
Grants-in-aid would have tapered off as we are near the end of the financial year.
Other than that, 50-year interest-free loans for capital expenditure have maintained their level -- Rs 1.25 lakh crore (trillion) to Rs 1.5 lakh crore (trillion).
That has an incentive-led segment within it. When states undertake reforms, we give incentives for them.
That is one way of nudging them to do reforms, such as giving smart meters.
Do you think the Budget addresses the issues of slowdown in private investment directly?
The fact is that the government has repeated its commitment to public expenditure and is making sure that it invests every borrowing that is done.
If 4.3 is capital expenditure to GDP, and the projection for the fiscal deficit is 4.4 per cent for the coming year and 4.8 per cent this year, literally what we borrow is going towards capital expenditure.
We are conscious of the way in which our borrowing is going to create assets.
Our borrowing is not for servicing the existing debt. It is not to repay the principal.
Our borrowing is clearly going towards asset creation. Therefore, in the light of this, in the context we have set from 2026, we will state the debt to GDP and take it close to 50 per cent.
Our intention of keeping fiscal prudence on top of the agenda without cutting on any expenditure is something I'll be happy about.
That's one of the biggest strengths of Prime Minister Narendra Modi's administration.
He has been fiscally conscious: Spend, but create assets, spend but make sure that people benefit from it.
This has been a beautiful guiding principle. And I think as a finance minister I owe so much to the prime minister for keeping this path clear before us.
With this clear in his mind, he is able to provide this relief to taxpayers.
You have spoken about the reform agenda in the Budget. A committee will be set up for that ...
The reform agenda continues in those six specified areas, without any hesitation.
But it is on the score of regulators in different areas -- say for the non-financial sectors, a lot of things are happening on inspection, certification, quality standards, etc.
Industry is also seeing if there can be simplicity and cohesion.
And among them if the departments or the regulators talk to each other, there will be a lot more ease of doing business ... There's no decision yet on who will head the committee or its composition ... The high-level committee will talk to the people, the stakeholders, before taking any decisions.
You mentioned that under the Financial Stability and Development Council (FSDC), you will evaluate the impact of financial regulations.
That is why we separately spoke about it in a different paragraph -- the financial and the non-financial sectors.
For the financial, it will go through the FSDC. And in the FSDC, first of all, among regulators there has to be a lot of conversation.
And into this, some of the stakeholders' inputs will be taken up.
In what format it will be taken up is something we'll have to decide.
And our intention is to ease any kind of pain points that may exist for the stakeholders.
The new Income Tax Bill is expected in a week. Will there be any surprises?
Well, I would like to believe it is one of those big-ticket reforms. Since 1965, there has not been any kind of review or update of the Income Tax Act.
If anything, more and more additions have happened. And additions are required. But additions have happened in varying times.
What was the context of India in 1965 and what was the context of India subsequently? Take two milestone years -- 1975 and 1991 -- but in each one of those, and I'm sure not every year, but at least in some way or the other, additions have happened to the Income Tax Act.
The letter and spirit of the original Act, and the subsequent additions, has all made it so bulky that it is such a user-unfriendly document.
So the intent, as I said in the July Budget, is to completely simplify its language.
It will have the same letter and spirit guiding it in its fullness.
And if there is any part which is loose or which has to be tightened up, we will do it so that it doesn't lead to any interpretation-related issues.
Because sometimes people approach the court, they pick up an issue and then give an interpretation.
But some other court somewhere else gives a different interpretation.
I wouldn't fault the courts.
If the language of the Act is yielding to such ambiguities, we'll have to correct it as well ... We will put it in Parliament, introduce it, and then send it to the Standing Committee.
Feature Presentation: Aslam Hunani/Rediff.com
