Finance minister P. Chidambaram has been observed to be in unusually relaxed and mellow moods, as he worked towards the fifth budget of the upa government, and his seventh overall. Talking to Anupam Goswami, he explains the reasons for confidence in the state of the economy: Mr. Chidambaram, this was your last budget for the current upa government. What did you begin with, and how are you ending this period as finance minister? When I became finance minister of the upa government in 2004, we had inherited a high fiscal deficit of 5.02 per cent, the tax-cdp ratio was 9.2 per cent, inflation had risen steeply through the months of May-August that year, and investment was stagnant. Average gdp growth for the previous six years had been 5.9 per cent, and the general economic mood was depressed every where. As the upa government completes its term, and if our trend projections for 2008-09-10 hold true, the fiscal deficit would have been brought down to 2.5 per cent of the gdp, and the revenue deficit will be 1 per cent. The tax-gdp ratio has risen to 13 per cent, and the investment-gdp ratio is 36-37 per cent. During the five years of the upa government, the average annual growth has been 8.8 per cent. Of course, there are many other financial parameters on which you compare 'where we began' and 'where we have reached', but my figures rests sufficiently on the figures that I have given. Do more recent figures suggest a levelling off in gdp growth? Yes, you could choose to perceive more recent figures that way, but you are still dealing with figures of 8.6 per cent, or 8.7 per cent. Even these growth rates are unprecedented in the history of our nation. I am certain that current trends will ensure that the overall annual gdp growth averages 9 per cent during the Eleventh Five Year Plan (2007 -12) and that it would touch 10 per cent in the final year of the Plan. Do you think you could have done more to increase the overall tax base of the country? It has been growing, although we have to still reach the potential. Even so, I feel I have done whatever I could have. If farmers deserve financial incentives, do you not feel that there is a case of taxation of farm incomes? I am not allowed to. Please read the Constitution of India, which clearly permits the Union government to levy taxes only on income other than agricultural income. And you obviously cannot make this a matter of my personal viewpoint. Now, that you have announced a grand scheme for loan waiver to farmers, how will you actually implement it? Please understand that this money is already out of the banking system. Many of the loans are already overdue, and classified as non-performing assets. Already, there is uncertainty and doubt over how much of the Rs60,000 crore of farm sector loans would actually come back to the lending banks. So, now, I have proposed that this outstanding amount be explicitly written off, and an equivalent liquidity be provided to the banks over a defined period. Of course, we will sit with the banks to finalise the mechanics of this solution comprehensively and effectively in the coming months. However, undoubtedly, all lending banks have welcomed this proposal. But how will the deficit targets of the Fiscal Responsibility and Budget Management Act targets be affected by whatever you do on this regard? We will be fully compliant with the frbm, and our commitment will not be affected on this count. Of course, I have also said that, due to a conscious shift in the expenditure in favour of key social sectors and health and education, we will need one more year to handle the revenue deficit as per the frbm target. This is an entirely legitimate deferment and does not dilute our commitment to the frbm in any way. Could you have reduced corporate taxes to encourage the manufacturing and business sectors as well? The effective rate for corporate taxes is 22-23 per cent. This is comparable with most other countries. Corporate organisations are doing well, and making sustained profits, and complying well with existing rates. So, why should corporate taxes be cut? In your budget speech, you expressed confidence that the Sixth Pay Commission would meet the reasonable expectations of Central government personnel. Yet, there is no specific proisioning in the budget on this count... I have provided for some increases in salaries and pensions of Central government personnel. I also have some headroom for any increase due to recommendations of the Pay Commission. Of course, I have some idea of what this will amount to, but I am not willing to go public on this count at this stage. You have reiterated concerns about*1 inflation at regular intervals, and in the budget too. How do you actually see trends in prices in coming months? Yes, inflation figures have been reflecting some pressure on prices. As I said in my speech, the most important task will be managing the supply of food items. This is a big challenge. I hope all the departments of the government will work together to manage the supply side on this count. Would you like another term as finance minister? (Laughs)... You see I am reasonably confident that the Congress will come back to power, at the head of a coalition. Who will be the finance minister will be decided by the prime minister of that government. I can pass on your question to the prime minister if you would wish so... But have you enjoyed your successive tenures as finance minister? I do not take up any task unless I enjoy doing that task. This is true of when I have worked as a lawyer, and this has been true when I have worked as Union finance minister. You can call it a stubborn streak in me, but I will do only what I enjoy.