Within hours of presenting Budget 2007-08, Union finance minister P Chidambaram spoke with Subhomoy Bhattacharjee and Bipin Chandran.Excerpts:

How would you describe this Budget?

It is a growth-oriented Budget. But we want this growth to benefit a larger section of the population. Growth is also a function of investment. If investment is taking place, there is nothing to suggest that growth would not take place.

How significant is the timing of your shift towards inclusive growth?

Inclusive growth has always been the goal of this government. It is one of the main objectives mentioned in the NCMP. We are on a 9% growth rate trajectory, and so the time has come to assert that inclusive growth is the goal. The budget therefore tries to implement that goal.

The Economic Survey also says 9% or more growth is needed for more employment…

Yes, it does. It says employment has risen, but so has unemployment as growth is high but not high enough.

Is there anything you would have liked to include in the Budget, but could not?

Nothing. This Budget was intended to address areas of the economy which are causing concern such agriculture, irrigation, watershed development, provison of quality seed for expansion of cultivation of pulses, health, the physically challenged, education (especially drop-outs), HIV, polio… and they all have been addressed. We have now enough money to address them.

Corporates do not seem too happy with the Budget…

Corporates cannot expect tax reductions every time. Corporate tax rates has already been moderated. The effective rate of corporate tax is 19.2% so they should not complain. There cannot be tax breaks at that rate of effective tax. Tax rates in comparable countries are much higher.

What is an ideal tax rate for corporates?

I think 30% is ideal. In European countries it is over 30%. But, here it is effectively, only 19.2%.

Growth projection for next fiscal?

It is difficult to project a growth level, but if everything goes well we should achieve about 9% growth. As far as inflation is concerned, we are trying to keep it between 4% and 5%, which is the optimum limit. Broadly, we are targeting 10% growth and inflation below 5% over the medium term.

The capital markets were expecting some reform measures. In the past one year you appointed several major committees—the Tarapore Committee, Percy Mistry and also Deepak Parekh committee. All of them have given quite a few recommendations to bring changes in the capital market structure. There was expectation that many of the recommendations will come in.

How was it possible? The Deepak Parekh Committee recommendation came only a week ago. The Mistry Committee report was submitted three days ago.

But you have included the recommendation of the Forward Market Commission in the Budget?

On Forward Market commission, I was reporting to parliament. I was not taking any decision.

There was a lot of unanimity on unified exchange rate and market for corporate bonds. Isn’t it?

Yes, that was announced in the last Budget and implemented now.

Are the pension and insurance bills not getting through affecting the capital market in the long term?

They have nothing to do with capital market reforms. They will only provide resources to capital market. Capital market issues have been addressed in the Budget but a number of initiatives have been announced regarding capital markets.

Could you tell us how the plan to converge regulations about investment through mutual funds abroad would work out.

At present Indians can take out and invest $50,000 a year abroad. But under present regulation you cannot invest through MF. The budget provision removes this hassle. It would allow Indians to invest abroad using foreign currency, using the mutual fund route.

Will this be in addition to $3 billion limit set on MFs for investing abroad?

These will have to be worked out and regulations would be issued.

The other criticism of the budget is that there was no road map for GST in this budget?

You see, we have reached an agreement only last week on the CST phase out. The empowered committee of chief ministers and the central government will now have to sit together and decide on it—we have 3 years to work on the roadmap. We hope to complete the work in the first year.

How would you react to the stock market reaction to the budget?

Stock markets across the world over fell and rebounded in the past 24 hours. The Chinese market fell by 10% and recovered 3.5%. Wall Street fell 3.9% and recovered. So, Indian market falling by 4% is not surprising. But the market fundamentals are healthy, hence market will rebound.

The markets have also got spooked by the additional cess. Do you think the funding for secondary education could have been done by other means than the cess?

No, cess is the neat way to know the amount that has been ear marked. There’s a 2% cess for primary and 1% for secondary. We know exactly, the amount that will be collected.

When do you think the measures announced by you to contain inflation will achieve the desired results?

In 1998-99, there were eleven weeks when inflation was 6-7%. In 2000-01, out of 52 weeks, in 48 weeks inflation was about 6%. Of this, in 22 weeks inflation was over 7% and in 12 weeks it was over 8%. India has also seen inflation as high as 22% in 1970s When the UPA government came to power, inflation was well above 6%.. We took various measures and it came down to 3.28. We are confident that the various steps taken by the government will result in desired results.

Do you think the move to bring ESOPs under FBT will deter corporates? How much do you expect to earn from it?

What we are saying is that there are a large number of companies offering employee stock option plans. And we are saying is that we will tax the companies at the time of encashing these ESOPs. The valuation of these stocks will depend on that the price of these stocks. We are not targeting any revenue from this now, as it will depend on various factors

One of the major steps taken by the United Progressive Alliance government in the recent past has been to cut petroleum prices. What is the impact of this on the government?

Cut in petro prices was done as part of the package agreed with the Petroleum Ministry at the time of cut in oil prices earlier this month. Revenues will be hit by Rs 2,700 crore due to cut in excise duty, but a decision regarding a cut in retail prices would be taken by the Petroleum Ministry.