The Union Budget is being described as a budget of ‘hits and misses’ with finance minister Pranab Mukherjee missing the bus on fiscal consolidation, reforms and foreign direct investment but keeping in tune with the government’s mantra of a rural push.
Deepali Bhargava, economist at ING Vysya Bank, said the increase in expenditure has neither been excessive nor skewed towards any particular sector.
“A healthy balance of expenditure increases and duty cuts/hikes have been undertaken. A reeling manufacturing industry - specifically the IT industry, construction industry, transport, have been given certain duty benefits.
Also, interest subsidies have been provided for SMEs, rural housing and education. At the same time, duty benefits have been withdrawn for some, Bhargava said.
Push to rural consumption and infrastructure especially through private finance and foreign capital, are positives, Bhargava said at a post-Budget discussion organised by ING Vysya Bank.
The finance ministry has targeted a fiscal deficit to GDP ratio at 6.8%, higher than ING Vysya’s expectations of 6.5%, because of higher spending.
Bhargava said the Budget lacks roadmaps for a transfer to a goods and service tax (GST) regime and reform agenda, like divestment.
“The surge in government market borrowing from Rs 3,60,000 crore to Rs 4,51,000 crore is excessive and at the same time there is no big incentive to invest,” Bhargava said.
Shahzad Madon, executive director at ICICI Prudential Asset Management, said that maybe the new finance minister is just not as good as his predecessor in making a good budget package.
“He must have sidestepped the key reforms because of political sensitivities but I am sure it will happen in due course. They have made a choice to stick to growth and it is the right one,” he said.
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