The Hindu Business Line : `Non-coercive tax regime will continue'

THE Finance Minister, Mr Jaswant Singh, today said that the Government would continue with a "non-coercive" tax regime despite the disappointment over personal income tax collections falling below the budget estimates by around Rs 3,800 crore.

In an interaction with the media after presentation of the Interim Budget, Mr Singh also said that that there would be no covert pressure on the banks to reduce agricultural lending rates though the Government had indicated that it would like to see softer interest rates extended to farm credit.

"There are two areas where expectations have not been met — personal income tax and excise collection. The personal income tax base has not expanded as much as we would have liked. However, I do not want a regime of coercion, but one that is participatory and based on voluntarism," Mr Singh said.

Regarding shortfall in excise collections the Finance Minister said that there was always a time lag between the announcement of the reform measures and the benefits to flow from the measures.

On the possibility of banks coming under strain on being nudged to lower interest rates on farm credit, Mr Singh said that the Government's desire was not an indicator of adopting a regime of administered bank rates. "We are not going back to controlling interest rates. We are not forcing banks but consistently advocating a certain approach. Manufacturing companies often avail bank credit at 5 per cent or even 4 per cent but the agriculture sector doesn't have the facility. I feel that 70 per cent of country and 25 per cent of the GDP cannot be ignored," Mr Singh said.

On the stock market reacting negatively to the Interim Budget with the Sensex dipping during the day, Mr Singh felt that markets should not be an indicator for judging the Budget. "The fundamentals of the economy continue to be "strong and sound. There is no reason to draw any adverse conclusion," he said.

On the move to merge the dearness allowance of central Government employees with the basic pay, Mr Singh said the employees deserved to reap the benefits of a sound economy. "It (the merger of DA) will have consequences on State finances. But Government servants also contribute to the growth of the economy. Why should they be denied the benefit? Their real income has to be preserved," he said. Moreover, he pointed out that there was already a "mismatch" of pay packets of Government servants and those of the private sector.