By IANS,
New Delhi : Finance Minister P. Chidambaram is unimpressed by his predecessor’s advice for deeper tax cuts, saying the move would fuel inflation.
In reply to the suggestion of “deeper tax cuts” by Yashwant Sinha, who was finance minister in the previous Bharatiya Janata Party (BJP) government, Chidambaram said that his government had already cut taxes and sacrificed revenue.
Chidambaram said Sinha’s advice, though “sober and reasonable”, would fuel inflation. “Giving up revenues and borrowing an equivalent amount in the market in order to finance expenditure would also be inflationary,” he said in a statement Saturday.
“I am happy to take note of the sober and reasonable advice given by Yashwant Sinha, a prominent leader of the principal opposition party.”
Chidambaram’s Congress party currently leads the ruling United Progressive Alliance (UPA).
“He (Sinha) has suggested that the government could have gone for ‘deeper cuts in taxes’. I have no quarrel with the proposition. After the budget estimates were presented to Parliament, we have cut taxes and sacrificed considerable revenue.”
He said only recently the government had given up revenue Rs.220 billion, and added: “I may point out that giving up revenues and borrowing an equivalent amount in the market in order to finance expenditure would also be inflationary. Nevertheless, I take Sinha’s suggestion on board and will explore the options.”
The finance minister Saturday issued a detailed statement on inflation – which touched a 13-year high at 11.05 percent for the week ended June 7 – and explained how spurt in global oil prices had pushed up prices in India.
Former finance minister Sinha had said the government should introduce “deeper tax cuts”, after the UPA government June 4 increased diesel and petrol price by Rs.3 and Rs.5 respectively, along with a Rs.50 hike per cooking gas cylinder.
The government has already reduced customs duty on crude oil from 5 percent to zero, customs duty on diesel and petrol from 7.5 percent to 2.5 percent, and customs duty on other petroleum products from 10 to 5 percent.