Mr.Chidambaram’s budget of 1997 has been widely acclaimed as a trailblazing breaking budget. From the point of view of Reserve Bank of India, it has very significant implications. The budget has acknowledged that interest tax is a bad tax and has commenced its phasing out.
One can debate the details of this framework, but on its own terms it succeeded: in no cases have fiscal policies caused the central bank to lose its price stability focus. Take the example of the ECB’s recent decision to extend its asset purchase programme. This has been taken in full independence to achieve our medium-term price stability mandate.