Expressing concern over rising food prices, Finance Minister P Chidambaram on Monday defended his Budget proposal of waiving farm loans and rejected the criticism that the Budget has forgotten the corporate sector.

"One of the reasons why inflation is still a threat is food prices in India," Chidambaram said, adding that after a long gap India has become a marginal importer of food grain, which is a dangerous omen.

"Because we are dependent on import, we are subject to world prices... No country with as large a population as India can be dependent on imports (of food grain)," he said at the post-Budget interactive session with industry chambers.

Since April 2007, prices of wheat in the global market have risen by 88 per cent and that of rice by 15 per cent, he said.

"Taking all this into consideration, we came to the conclusion that farmers' distress calls for unorthodox response... response was farm loan waiver," the finance minister said.

The wholesale price-based inflation rose to 4.89 per cent for the week ended February 16 from 4.35 per cent in the previous week. Responding to the issues raised by the corporate sector, he said: "I have not forgotten the corporate sector. Despite the advice given by my Chief Economic Advisor and suggestion from Economic Survey, we accepted your (corporates) demand of retaining peak Customs Duty rate."

He said excise duty reductions and relief given in personal income tax would help in spurring demand for consumer goods and benefit the industry.

The finance minister said he had also proposed deeper cuts in excise duties in areas where growth was flagging like two wheelers, three wheelers, cars, buses and their chassis and paper.

Besides, the Budget has made specified customs duty cuts, Chidambaram said, adding all tax relief would directly benefit the corporate sector. He said the government also intended to reduce Central Sales Tax, which is a levy on inter-state sale of goods, to two per cent next fiscal from the present three per cent.

Besides, the Budget has proposed lifting of tax deducted at source (TDS) from listed corporate debt and avoiding double taxation on dividends paid by domestic companies and their subsidiaries. Budget has also proposed major tax breaks for hotel and hospital industry, Chidambaram said.

"What we have done is sufficient in order to keep the engine of growth running at full speed," he said.

While assuring the industry of addressing their specific issues, he said: "There is no scope of rewriting or revisiting basic philosophy of Budget." The effective tax rate on corporates still works out to be 20.6 per cent, against the prescribed rate of 30 per cent, excluding surcharges and education cess.

He further said the UPA Government has increased the tax-GDP ratio to 12.5 by the end of 2007-08, but still it is one of the lowest in the world.

Unperturbed over fall in the stock markets, Chidambaram on Monday said the downslide reflected happenings in the world market. "Asian markets have slipped today because of fears of recession in the US, what is happening in India shows that we are not as decoupled as we think we are," Chidambaram said in reply to a query from Bajaj Auto [Get Quote] Chairman Rahul Bajaj over the fall in share prices in the Indian markets on Monday.

He said: "I don't think we need to worry too much about that. This is really reflecting what is happening in the world market."

The Bombay Stock exchange benchmark, Sensex, on Monday dipped by 571 points in early trade. 

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