Though the finance minister has budgeted for a 2.5 per cent fiscal deficit for 2008-09, many believe he'll overshoot this, given the loan waiver, impending Sixth Pay Commission awards and off-Budget liabilities.

He answered some of these questions to Sunil Jain and Siddharth Zarabi. Excerpts:

How will you account for the Rs 60,000 crore loan waiver?

I don't have to account for it right now. This money was out of the banking system and they would have recovered some part of it over a few years. Now, our job is to provide banks a level of liquidity to deal with the amount they will not get. The details will be announced when they are ready.

Are you back to where you began in terms of the fiscal deficit? Your target is 2.5 per cent, add 1.1 per cent for bank loans, 1 per cent or more for the Sixth Pay Commission and off-budget liabilities which the EAC says is 2 per cent - you say this is 0.3-0.4 per cent of GDP.

I'm not back to where I was. Including the off-budget liabilities then, the fiscal deficit was 5.15 per cent. Add the off-budget liabilities in Budget Estimate 2007-08, and the figure is 3.8 per cent, for the Revised Estimate it is even lower.

But the EAC's figure is five times yours.

You should put that question to the EAC (Economic Advisory Council).

Why haven't you provided for the Pay Commission?

We have no idea of its impact right now. We'll see.

Your expenditure target seems very low considering it's budgeted to rise under six per cent (Revised Estimates to Budget Estimates). Will you overshoot this?

There is tight expenditure control. The Plan expenditure is going to rise by around Rs 38,000 crore {Rs 380 billion (BE to BE)} or around 19 per cent. Non-plan expenditure will rise by a much smaller amount, by Rs 64,806 crore (Rs 648.06 billion) or 17 per cent (BE to BE).

Are we back to tinkering with excise rates?

Not at all. We had to reduce overall rates as part of the GST (Goods and service Tax). As for the individual reductions, for pharma and other sectors, we're trying to stimulate demand through tax measures. Some people like everything to be perfect, we're just trying to boost demand.

How much stimulus?

We're hoping to retain growth at 9 per cent.

You've suggested some short term measures to deal with forex inflows. Is a Tobin tax in the offing?

These cannot be discussed with the press first, they have to be announced.

Are you satisfied with the progress on Outcomes versus Outlays?

Reasonably so. We're going to get external evaluators. Under Plan B, states can get more funds if they spend well.

Is treating Securities Transaction Tax as business expenditure double taxation?

No, in any case, the market is just a small part of the economy.