Q: Does he have the ability to reduce taxes looking at the fiscal situation?

Ranina: Yes he can reduce the tax rates provided he recovers money in some other way and that’s the attempt he will try to make. So he will, for example, restore the standard deduction for employees other benefits, high ATC for housing, etc. Then he will try to increase revenues by collecting more maybe which is stuck in litigation, that is one way of doing it and other is disinvestment. If he is under tremendous pressure to have a higher rate of tax at a very high level of income, which isn’t desirable and shouldn’t be done, but if he is under pressure from the revenue authorities he may try to do that.

Q: What are the chances of that happening?

Ranina: I can’t say that but I don’t think he should resist that pressure. One question I wanted to ask Mr. Sinha was that to what extent he would have resisted the pressure from my revenue department was always out to increase the rate of taxes.

Q: We have heard enough of the talk. We all know what needs to be done. Is he going to walk it on Monday?

Wadhwa: I hope and I believe he can and he should. The government has been given an overwhelming mandate to go out and do what is absolutely right. First and foremost, I hope whatever they do they do it with a five-year vision. No taxpayer, certainly global taxpayer likes inconsistency. You bring in FBT today and you withdraw it tomorrow. Whatever you want to do do it with a long-term vision in mind. Whatever you do, do it simple. If you want to increase taxes, increase it. Don’t bring FBT, cess, surcharge in different baskets. Do it simple, if that is what you want to do. Focus on the core areas. Consumption needs to be continued, maintained. Don’t tamper with the capital markets just because we have had a little blip upwards.

Do remember that corporate India has been starved off capital over the last 12-18 months. It is only now that there has been a positive momentum thanks to the stability in the political area and the expectations out of the budget. So, don’t treat that as an objective achieved. Capital markets need ongoing support. So, whatever you do, keep that from a short-term perspective at least in mind and focus on the two key areas, which is infrastructure and education. So, I guess his agenda is pretty well cut. He is capable of and has demonstrated the ability to do things straight and simple. I hope he goes out and bats the way he always does.

Q: How realistic is this? On the tax sops on affordable housing, the revenue will go away immediately; the growth kick-up will come with a lag period. Right now, he desperately needs revenues. Do you think the Finance Minister will be able to do all of this?

Wadhwa:  It is a difficult roadmap. As I said earlier, given that almost all of the world is reeling with fiscal pressure at this point, in one sense there is a license not to worry too much about fiscal deficit at this point. If you have to worry about it, deal with it with unusual methods of trying to either get the disinvestment going or indeed come out with some sort of amnesty scheme, which will allow you to be able to collate more money. I don’t think he needs to touch tax issues, which at this point in time are relatively sensitive, given the demand pattern and as Mr. Godrej rightly pointed out, the reduction in taxes to some extent helped continue maintaining demand. If you take it back too soon, the economy is still not out of troubled waters. Let’s not forget that.

I would also think that he needs to look at some industries that have been particularly hurt by this global financial crisis. For example, exports have been seriously hit. There is little certainty about exports coming back with any strength given the world consumption pattern at this point. Therefore, maybe, he needs to reintroduce some sort of a tax concession back to exports. IT is one.