When finance minister Pranab Mukherjee walked into Parliament for his Budget 2010 speech, India Inc was on the edge, worried about the contours of a government plan to roll back the booster measures announced to combat last years financial slowdown. That Mr Mukherjee managed to dispel all such fears was amply reflected by the stock markets that rallied in defiance to the trends of previous years, despite the lack of any major reform measures in the budget. Industry was pleased that the rollback was well-calibrated while taxpayers were happy with an unexpected bounty. Relaxing at his North Block office after months of hectic activity, Mr Mukherjee spoke to Media on the fine print of Budget 2010 and the road ahead for India. Excerpts:

There is this apprehension that the budget is inflationary. While taxpayers have got some relief, some others may be hit hard...

The development process is for the ordinary people. Every penny we spend goes to the peoplewe are going to spend Rs 3,73,000 crore as budgetary support towards the central Plan. It is meant for the people of this country, not for those of another planet. Everyone is a beneficiary here.

Yes, the budget has some inflationary ingredients, but not much. I have calculated that the tax proposals will have an impact of about 0.4% on the wholesale price inflation. But it will be absorbed in the course of time. Otherwise, the alternate would have been to leave a big gap. You have to bridge this deficit. If you dont do this and go on borrowing, then that is not good for the people, particularly for the economy. We will have to be careful from all sides. We cannot be unidimensional.

On fiscal consolidation, you seem to have bettered even the Finance Commission proposals. But you didnt show any such urgency in cutting revenue deficit...

I have mentioned the revenue deficit in the budget documents, although I have not mentioned it in the speech. The targets are there in the budget documents (revenue deficit is proposed to be cut to 2.7% by FY13 from a revised 5.3% for FY10). Revenue deficit will be a little more this year because of a revenue shortfall. Direct taxes have shown some improvement. But there is some shortfall in overall collections because indirect taxes are down around Rs 26,000 crore. So revenue deficit is high.

Has revenue deficit consciously been kept high?

I have not kept anything below the line. You know, if I would have kept measures like fertiliser subsidy and oil subsidy out of the budget, I could have easily kept Rs 25,000-30,000 crore out. The revenue deficit would have been down. But I wanted to be honest and bring out every expenditure in a transparent way.

I have also said I would be targetting an explicit reduction in the governments domestic public debt-GDP ratio and bring out a status paper detailing the road map for this within six months.

You have budgeted Rs 40,000 crore from disinvestment for the coming fiscal. How confident are you of meeting this target, given the market conditions?

We keep an eye on the market, and will take decisions accordingly. I am very consistent in my disinvestment policy. I have done it very quietly and the money raised will be used in creating capital assets. The idea is to bring public participation in these companies as it not only unlocks the value for all partiesthe government, the company and its shareholdersbut also improves corporate governance. I had pointed out in my budget speech how the listing of five PSUs increased their value by 3.8 times.

Will you consider strategic sale if market response remains subdued?

There is no question of strategic sale. I am very clear about this. The government will retain 51% equity. The methodology will remain the same as the idea to bring about people ownership in these companies and improve their functioning.

Will the railway minister agree to service tax on railway freight?

It was there earlier, but I lifted it for a few months last year. So this is not anything new that I have imposed. In a multi-party democracy, divergence of views are bound to be there. Moreover, all essential commodities are exempted, so it will not lead to increase in transport costs of essential commodities.

You have provided very little towards oil subsidy. Is that a way of forcing deregulation on the sector?

I have said in one paragraph of my speech that the Kirit Parikh committee report is available now and is under consideration. My colleague (petroleum minister Murli Deora) will take an appropriate decision on the recommendations. So I am not making any provision right now but one should not read too much into it. Since a decision will be taken, it will either be accepted or not accepted. But a decision will be taken. If the decision (to continue with subsidy) is taken, the necessary provisions will have to be made. Its as simple as that.

Does the decision not to raise the service tax rate and bring the cenvat rate to that level mean we could have a central GST rate of 10%?

No, no, it is not that. I have raised excise duty to 10% and service tax is at 10%. Some people might read this as a signal that perhaps we are approaching GST and that this may be the rate. But that will have to be decided in consultation with states. There must be a consensus, a convergence of views among states. What will be the rate, I cannot unilaterally say. The concept is that as we move towards GST, we should have the same rate of taxation for both services and goods. You can say we have taken one step towards GST by aligning tax rates of goods and services. The rate will be decided only after consultations with states.

You have indicated that the Direct Taxes Code could be introduced from next fiscal, but will the legislation be in place by then?

We will introduce the legislation sometime in the monsoon session of Parliament. Based on the discussions we had with all the stakeholders, I want to prepare a draft and place it for public comments once again before I introduce it. However, this time it would be done for a shorter period because once I introduce it in Parliament it will go to the Standing Committee that will also invite view of stakeholders. But since the process of consultation and preparation of the draft legislation will take some time, it will be difficult to bring the legislation in the budget session.

There is this impression that the new low-cost pension scheme is for every one?

It is for every one in the unorganised sector but the condition is that the subscriber will have to deposit Rs 1,000-12,000. Please note that the scheme is not available to people in the organised sector.