As the Finance Minister presented the Budget for the fiscal year 2009-10, I went through on the CNBC’s website in the office and was kind of hoping for some big ticket announcements like increase in FDI in Insurance sector, APAs in the field of Transfer Pricing etc. Nothing of that sort turned up and I was kind of disappointed. Considering the fact that a Stable government has come to power and it shall not have to bow down to the demands of the left front and other coalition partners, this government should have made bold measures. I thought that this was going to be the government with a strong spine but I was wrong.
After attending the Budget discussion organized by KPMG and listening to Mr Swaminathan Iyer - leading economists and consulting editor of the TOI and ET Now, I realized why would this government even care for such measures. It already has the winning formula which are funds for National Rural Employment Guarantee Program and Loan waiver. This seems more like an election year Budget. Hence as Mr. Swami puts it “This Budget as they have termed is the Aam Aadmi budget is more out of compulsion than out of conviction”
How will the government fund the gap between the revenue and the expenditure? The most common answer is borrowing. There is one common pool from which both the government and the others borrow. If the government borrows the entire 400,000 crores from this pool then there is hardly anything left for the others. This understanding led the markets to react negatively. However, later this was clarified that government would borrow an amount close to 200,000 crores from this common pool and the rest shall be “monetized” i.e printing of more currency notes which in long term leads to inflation and hike in interest rates. I am not sure what is the way out here!!!
For the silence with regard to disinvestment, FDI…Mr. Swami mentioned, “one should not err on the side of Modesty”. He mentioned, “This is a delicious period – anything that government gives away can be justified on the economic grounds”
Overall as Mr. Swami puts it, this budget has a good content, lousy packaging and bad presentation. The content is good as it seems to be a decent effort made by the Finance minister to make India move ahead in difficult times but when it comes to presentation its was poor. The budget contained that the fiscal deficit shall be reduced to 5.5 percent next year but it for some reason was not a part of Fin Min’s speech. The government's plan with regard to borrowing was not not made clear in the Fin Min speech. Hence the Budget was silent and spoke loudly about wrong things.
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