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Steps to curb inflation: Chidambaram

P. Chidambaram

New Delhi: Finance Minister P. Chidambaram expects interest rates to moderate once the inflation rate declines. He made it clear on Saturday that the Government was ready to take further fiscal, monetary and supply-side steps to curb inflation. ``Interest rate is a function of the monetary policy adopted by the RBI. When there is tightening of the monetary policy, interest rates will also go up,'' he told PTI in an interview.

In the last one year the Cash Reserve Ratio (CRR) and Repo rate had been revised four times in order to tighten the monetary policy, Mr. Chidambaram said. ``Once inflation moderates and the RBI adopts a more accommodative policy, the interest rates will also decline. Interest rate is directly linked to inflation.''

Asked if inflation was a matter of concern, he said: ``It is. If inflation is a matter of concern, high interest rates are also a matter of concern. If inflation moderates, high interest rates will also moderate.''

In the long-run, various measures undertaken for the agriculture sector would ensure higher production of wheat, rice and other cereals. That would lead to an improved price situation.

The Fringe Benefit Tax (FBT) on Employee Stock Options (ESOPs) proposed in the budget was payable by the company and it would also apply to the ESOPs not cashed, Mr. Chidambaram said.

``What has been stated is that ESOP is a fringe benefit and it will be taxed. The rules have not been worked out and the method of calculation has not been prescribed. It is only a policy announcement,'' the Minister said.

Asked whether the company or the employee would be required to pay the FBT, he said, ``it is a fringe benefit and obviously it will be on the company.''

Would it apply to ESOPs given before the budget and not encashed? ``Of course, it will. The gain is taxed only when the ESOP is exercised. When the ESOP is not exercised, there is no gain at all.''

He shrugged off criticism, notably by the corporate sector, saying that it was on expected lines. ``I don't think one should get too despondent about criticism or get too flattered by praise. One should take both in one's stride.''

Mr. Chidambaram said ``the corporate sector gets an unduly large share of coverage in the visual media and the print media.'' The physically challenged who were promised a hundred thousand jobs did not get access to media, he said.

When it was pointed out that corporate leaders who criticised the budget immediately after its presentation did a U-turn the next day during an interaction with him, Mr. Chidambaram remarked: ``I didn't speak to them overnight.'' Nevertheless, he thought that the negative business and corporate reaction was expected because ``everybody looks for what the budget gives him or her.''

He said reforms also meant changes in the agriculture sector, health and rural development and uplift of the Scheduled Castes and Scheduled Tribes, which is inclusive growth. He said the Petroleum Ministry's proposal for issuing smart cards for providing subsidised LPG and kerosene and improvement in delivery services for the farmers were a major reforms measure.

``I believe we have not paid enough attention to the problems of HIV-AIDS, polio and problems like recharge of ground-water. I believe that we are opening the process for the neglected sections.''

Reforms meant providing funds for recharging 70 lakh water structures, their repair and restoration and massive programmes to improve production of seeds. ``If all these are not reforms, then I don't know what are reforms,'' he said. — PTI

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