Expert Zone
Straight from the Specialists
Budget 2013: Political strategy, not economic blueprint
(Any opinions expressed here are those of the author and not of Reuters)
With the dust settling after Budget 2013, the picture is getting a bit clearer. Opinions on the budget have ranged from praise to outright criticism. The true position lies somewhere in between — depending on one’s political inclination, views on the finance minister and one’s financial interests.
Most agree there is considerable misalignment between diagnosis and prescriptions in the budget. The three biggest problems identified by P. Chidambaram are:
- rising fiscal deficit that needs to be controlled
- high current account deficit and
- declining economic growth rate.
But the solutions proposed in the budget seem to address only the fiscal deficit problem and that too temporarily. While the finance minister has done well to stay within the limit of 5.3 percent, the improbable arithmetic of the budget for FY14 suggests that the fiscal deficit target of 4.8 percent of GDP seems to be a strategy for buying time and a leap of hope.
The economy has to grow about 6.5 percent in FY14 to generate the necessary tax revenues and also have a large enough denominator. This appears to be too optimistic. Too many hurdles remain — economic slowdown may not have bottomed out, little improvement in the investment sentiment, and a weak global economy.
Risk factors in Budget 2013
(Any opinions expressed here are those of the author and not of Reuters)
Finance Minister P. Chidambaram has apparently done the impossible. He has brought down the fiscal deficit in the current year from the budgeted 5.3 percent to 5.2 percent in spite of the fall in revenues. What’s more, the deficit was further slashed to 4.8 percent in the 2013/14 budget. Is that realistic?
Look at the expenditure. In the current year, subsidies on food, petroleum products and fertilizer were up by 676 billion rupees or 36 percent. These are precisely the expenditures the minister had to curtail, though he did make an effort to do that too late in the day. With the jump in non-Plan expenditure, the fiscal deficit could be brought down only by cutting Plan expenditure.
Budget 2013: A run-of-the-mill affair
(Any opinions expressed here are those of the author and not of Reuters)
After the sustained hype of a game changer budget, Budget 2013 was a totally run-of-the-mill affair with no announcements of any kind of deregulatory or growth propelling initiatives.
True enough, some of the more promising measures taken in the last 12 months were not related to budgetary statements. Not surprisingly, the Sensex greeted Budget 2013 by falling.
Budget 2013: A high-calorie budget
(Any opinions expressed here are those of the author and not of Reuters)
India’s left-leaning government believes in the ‘eat more, burn more’ philosophy in managing its finances. Budget 2013 takes that idea further with an even stronger projected rise in spending.
If the increased spending is aimed at productive use, it may still end up doing some good. But the track record does not inspire confidence. I hope that after talking the talk, the finance minister will not lose his nerve when it’s time to walk the walk.
Budget 2013: Visible impetus on growth
(Any opinions expressed here are those of the author, and not necessarily of Thomson Reuters)
Finance Minister P. Chidambaram presented the annual budget at a time when India’s economy is going through a challenging period. India faces the four-pronged problem of high fiscal deficit, an unacceptably high current account deficit, declining growth and lower savings.
