Straight from the Specialists
(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.
With an increase in tax rates for corporates and the rich, and perhaps help from a reflating economy, the budget hopes for a 19 percent increase in tax collection. It is also budgeting for a 16.4 percent increase in overall spending. And this is despite an implausible 10 percent decline in subsidies.
Given that it wants to keep its borrowings under check, the government is hoping for a 134 percent increase in disinvestment of its shares in public companies (but not through privatization). If the IMF’s definition of fiscal deficit is used, which treats disinvestment as financing not revenue, then there is really no decline in the deficit expected. Clearly, the government’s voracious appetite remains as stout as ever.
(Any opinions expressed here are those of the author and not those of Reuters)
Over 15 years have passed since P. Chidambaram presented what was called the ‘dream budget’. It was a budget that changed the discourse of financial policy and offered a vision of India matching the growth and dynamism of the tiger economies of Southeast Asia.
In the last full budget of his government’s term, the finance minister once again has a chance to alter the discourse of policy away from handouts and towards efficiency. Our advice to him is to be as bold in ideas as his conviction permits and as ruthless in execution as the law allows. A few ideas for him to chew on: