In the first budget, the government can sketch out the plans for the next five years. This does not have to be a budget just about 2019-20. It can also be a budget for the next five years, said Swaminathan Aiyar, Consulting Editor, ET Now, in an interview with ETNOW. Edited excerpts: In the context of the last interim budget, before we went into elections, there were a lot of forward looking statements like some sops to the middle class, a roadmap of sorts was laid out in that budget. As the main budget comes up in July, does it set the framework for the new finance minister to take things forward?Well there are short term issues and rather long-term issues in presenting a final budget. Within that, instead of focussing on what was promised on the interim budget, the more important thing to watch out for — since it appears the economy is slowing down much more than was expected in February — is whether there is going to be a fiscal boost at this particular point to revive the economy. I would be personally against the fiscal boost, I would say the fiscal situation actually is pretty bad. With a lot of jugglery, Mr Arun Jaitley was keeping the fisc deficit in the last few years down to 3.3-3.4%. It was very clear that this was being achieved by not paying bills of all kinds and by bringing forward some advance payments. The CAG revealed this quite dramatically. So, on the fiscal side, trying to go for a fiscal boost is the wrong thing. The one possible windfall that Nirmala Sitharaman is going to get would be the Bimal Jalan committee which is going to probably say that a large amount of RBI reserves are excessive and can be transferred then the question arises whether Nirmala will then go on a spending spree? I would say please you must not spend even one penny of this. The entire amount that you get from the Reserve Bank should go towards recapitalising banks and paying down government debt. That way you achieve a transfer below the line but you do not use this for a runaway spending spree. These are the ways in which you reduce the long-term problem of high interest rates. Why are interest rates high? The total public sector borrowing requirement of centre, state and public sector undertakings is getting towards 9% of GDP. That is so high that it is resulting in high interest rates. You have to get that down. In my view, you cannot just keep interest rates down by talking to the RBI. That may achieve a small amount of 25 bps, 50 bps, but to permanently get down your high real interest rates, you have to reduce the amount of government debt and the government is crowding out. That means the fiscal consolidation has to become an important part instead of going for quickies. Beyond that, in the last budget, the indication was that corporate tax should be brought down to 25% for everybody including large companies. But would the unfinished business actually happen now? On the other hand, the aim of bringing it down to 25% was as Arun Jaitley originally said, was to be competitive with other Asian neighbours. 30% rate is too high. Even it is brought down to 25%, by now, by and large, the Asian neighbours have a rate below 20%. So the question again arises will the new finance minister now set a new target for the next five years, once again to become competitive? This will be an interesting question. Of course, the IBC has been a success in terms of intention and ending the worst excesses of capitalism and yet it is much too slow, much too tardy. We need to devise some ways of making this reform much faster and more effective. I would say these are the key structural reforms that are required. Within the budget, there was a PM Kisan approach. These freebies, here and there, are not good unless it becomes part of the system and saying we are going to replace subsidies on goods and services by direct cash transfers, if that is one of the reforms that Nirmala Sithraman can bring around, this will not pertain to the finance ministry alone. It would be an overall decision first and foremost by Narendra Modi. But if Narendra Modi decides on that, she would have an important role to play in carrying out that vision. Usually the first budget or the first few months after a huge win like this is when you would expect that the government of the day to push through big ticket reforms. But we saw a lot of success in the last term has come from large welfare schemes. Can there be a U-turn from the mode of trying to disprove the suit boot ki sarkar jibe?I would simply say that incrementalism has succeeded. Because it has succeeded, there is every reason to continue on that path. There is no reason to go for big radical things. What you can do in this first budget is to sketch out what are going to be your plans for the next five years. This does not have to be a budget just about 2019-20. It can also be a budget for the next five years. Now if you go back to 2014-15, Arun Jaitley’s first budget, I welcomed that because among other things he said we are going to corporatise the railways. We are going to corporatise the Port Trust. We are going to privatise various dud public sectors undertakings. I welcomed that. In practice nothing happened. Nothing was privatised. Railways were not corporatised. Port trusts were not corporatised. In many ways that they started off but found themselves unable to do because of resistance from the RSS, from the Bharatiya Mazdoor Sangh, from the Swadeshi Jagran Manch. Will Modi try to go faster on some of these issues? Maybe somewhat faster, but if incrementalism is going to be the rule, then we have to ask again what can he say? I would say you could say that long term we are going to get down real interest rates. This is going to be done by a combination of coordination with Reserve Bank of India on growth matters as much as inflation and it is going to be done by fiscal consolidation to bring down the real rate of interest. So if bringing down the real rate of interest is put as a long term reform that we are going to strive for, the markets will find fantastic. It is very good news. The other thing is GST. There have been too many rates. Suppose Ms Sitharaman says instead of having so many rates, the 12% rate and 18% rate, we will attempt to combine into 15.5% or 16% rate. This again, would be widely welcomed. It would be a matter of simplifying that particular thing. Finally on the IBC, if she can lay down some concrete ways of ensuring that the process is much faster, then all these three things would be major announcements that could be made. They may not necessarily be implemented within 100 days, but if the announcements were made that this is the long term, that I think will certainly help. That would draw out cheers, enthuse markets.