Times are so tough, anything not negative appears to be a positive.
In not being overly populist in a pre-election year, the Budget is a positive. But, in not using the tough times to push in tough measures, it might have missed an opportunity.
The FM’s speech highlighted the problems very accurately and articulately. “The link between policy and welfare can be expressed in a few words: opportunities, education, skills, jobs and incomes,” to quote one.
But the solution to all these seems to be one word – government. So you have a whole array of government programmes and “sub-plans” to address these issues.
The other part of the solution, entrepreneurs, was forgotten. This was the opportunity missed – to rekindle the spark of entrepreneurship that had fuelled the economy to 8%+ growth FY04 through FY08.
Even the external sector problem was well-articulated. But as in the first case, here too, the proffered solution was one-sided – FDI, FII or ECB. Yet, there is nothing in the Budget that focuses on any of these. Indeed, the weakness in the INR post the Budget suggests the forex market also remains concerned.
On the numbers, the commitment to fiscal discipline is commendable. Thus, FY13 fiscal deficit is now placed at 5.2% (almost in line with the budget estimate of 5.1%), and for FY14BE, the figure is even lower at 4.8%.
Some of the revenue assumptions seem optimistic, like PSU divestments of over Rs55,000 crore and telecom spectrum revenue of over Rs20,000 crore (FY13 PSU disinvestment was Rs24,000 crore v/s budgeted Rs30,000 crore and spectrum revenue barely Rs1,000 crore v/s budgeted Rs40,000 crore).
However, it is also possible that there is some cushion on the expenditure side. For instance, Plan Expenditure is budgeted to grow 29% over FY13RE i.e. incremental spend of over Rs1.25 lakh crore. As in FY13, In case of any major revenue shortfall, this expenditure may be cut by 10-15%, and the fiscal deficit target may still be achieved.
Some sections of the market seem disappointed. But to be fair to the finance minister, the Budget is just one of the many steps required to revive the economy. He and his government have made many bold announcements preceding the Budget. Let us hope more follow.
The writer is Joint managing director, Motilal Oswal Financial Services
