Budget Impact: A political budget?

Point your mobile to: http://m.ibnlive.com

New Delhi: In the programme Budget Impact, opinions and views were brought forth on the Budget 2007 from Delhi and Mumbai.

In Mumbai, a panel represented the face of the modern corporate India - Aswini Kakkar, a name synonymous with the travel and tourism business, Kishore Biyani, a name synonymous with the retail trade in India and Ramesh Damani, a name synonymous with the stock markets.

Joining the show from Delhi, were Civil Aviation Minister Praful Patel, CITU Secretary and former MP Deepankar Mukherjee of CPI-M, former president of CII and member of Hero Group Sunil Munjal.

It is said that this year’s budget is a political budget, the focus was on managing politics and not so much on managing or driving forward the economy.

Commenting on that, Praful Patel said, “All budgets are political,” as governments come because of the political mandate.

He also said that due to integration with world economy, things like taxation have already been standardised and nothing much can be done.

So, what could be done is to widen the revenue base and deploy the money collected on the sectors, which have not been given due attention. After 60 years of Independence, roti, kapda and makan (food, clothes and shelter) are as relevant as it was in 1947.

Patel suggested that the budget was an aam admi budget, but the first reaction of CPI-M Polit Bureau, Mukherjee, was that it was not an aam admi budget and the Finance Minister could have done much more.

Explaining the expectations of CPI-M from the budget, Mukherjee said, without economics, there can’t be any politics and India should not be divided into rich and poor.

There are 37 crore workers in India working informal sector, who want social security schemes, which they are not getting. Secondly, workers working in organised sectors are not happy with increase in exemption limit of Rs 10,000.

Both the politicians claimed that there are two Indias and the budget, particularly in last decade, has represented one India, the affluent India.

When asked whether he accepts the dichotomy, Munjal said, “Yes and no”. Explaining his answer, he said, there is no doubt that we need to be more inclusive in our entire economic growth.

But there is only one answer that is ‘growth’. There is no other answer to take away poverty, to be able to provide more jobs - both in formal and informal sectors.

The Finance Minister has spoken of additional funds in education, healthcare and agriculture, but still missed the point about how to deliver the funding to get a result out of that.

Soon after the budget, most of the corporate India felt a little disappointed, because, Biyani said, we believe that the cost of doing business has gone up for us substantially.

He also said that the consumption is the factor that drives the economy, but there was no intent to increase consumption and the emphasis of the budget was on savings.

When asked how the budget addresses inflation, infrastructure and enthusiasm, Damani said that it was unfair to blame the budget for what happened in the market, when it shed 500 points, the market is probably taking global cues.

PAGE_BREAK

With Rs 35,000-40,000 crore surplus money, the Finance Minister could have done something more imaginative - on the issue, Kakkar said, “I think it’s a case of hugely missed opportunity. I think he had such a brilliant chance to actually carry forward some of those reforms that he is known for.” He also said that it would take time to see the end result even on the sectors on which he has done something.

A budget is not just about economics but it’s principally about politics, but what happens if politics starts taking over? And also the scope for manoeuvring of UPA is reducing on tough economic issues on the wake of election defeats and because of the pressure from the Left. “I don’t agree with the assessment,” said Patel on the issues.

Ultimately good politics is good governance and good governance is good politics, he added. No budget can give enough to please 100 per cent across the board. India is a large and diverse country and considering that, the Finance Minister had done a good job.

Disagreeing that there is a slowdown in economic process, Patel said, the Finance Minster has not gone back on anything, which he is doing so far and he has just expanded the list and he has done a good tightrope walk and that is best any finance minister could have achieved.

So is a tightrope walk or a missed opportunity? Munjal replied, one of the biggest reforms Chidambaram has done on taxation in India is introduction of value added tax (VAT).

But the next step is GST, and to implement GST in two years time, one needs to start moderating tax rates right now. One has embedded taxes in the system. We are one of the highest manufacturing taxes countries in the world, without exception.

On every issue they want to confront the Government, and Left wants power without responsibility, that’s the criticism of the Left when it comes to economic policies. “I will not be provoked, whatever adjective is used,” said Mukherjee on the issue.

He questioned the reform, saying when global inflation increases, global wages do not increase and minimum wage remains the same. Inflation, unemployment and agricultural distress are the three issues need to be addressed.

Issues emerged from the political debate in Delhi are - reforms for whom and how can you make reforms more attractive politically? These are the challenges the Finance Minister may have faced in this budget.

Good economics is good for everybody, but it wasn’t implemented in this budget. On the view of the compulsions like losing elections, fighting inflation etc, under which the Finance Minster presented the budget, if he could be forgiven?

“I would say he is an extremely intelligent human being and he spends a lot of time and effort in creating the budget. So, I don’t think it has anything to do with the last two or three days,” said Kakkar on the compulsion. What he missed is that, employment is one of the biggest needs of the country today, he added.

There is a need to bring more consumers into spending and that is how an economy grows. For example, China has reduces taxes, reduce interest rates and the consumption classes in China is growing tremendously. Narayan Murthy said, “Cut excise duty by 4 per cent. You will lose Rs 20,000 crore, but will make it up.” So what more can be done to boost consumption?

PAGE_BREAK

On the issue, Biyani said modern retail is all about selling value added products - goods and services. More value addition you do, more jobs you create. If modern retail is encouraged in the right manner, it can create lots of jobs, lots of opportunities. Goods will be consumed more, if price effectiveness is created. “I think at a particular price, demands for a particular product in India is unbelievably great.”

On the issue, Damani said, in a comparative economy, prices would fall down. We can now fly Mumbai-Delhi in few thousands of Rupees, compared to a while back. In a capitalistic society, that happens - telecom, aviation, retail, consumers are becoming king.

He also added that chance of expansion of economy by making it competitive is reduced by not allowing FDI, protecting insurance, not doing labour reform.

It appears to be a budget of missed opportunities. Is it a opportunity lost for ever or is it a opportunity that can be regained?

On the issue, Biyani said, India is on the good wicket and I think it’s all about how you plan for the future. Probably we may not build up the scenario for the future to become an economic super power; probably we have slowed down a bit.

In high interest regime, we tend to allocate capital more wisely and efficiently and that is perhaps needed in the economy, said Damani. So, it is good to slow down the economy, take a reality check.

There is a feeling that the Left is focussing on a smaller picture, not looking at the bigger picture. Focusing on pet food exemption, CPI-M MP Mohammad Salim said after the budget that, “What kind of exemption is this? An exemption on pet food, is this call you and budget for the aam admi?” It appears that the Left criticising the Government for the sake of criticising.

Replying of the issue, Mukherjee said, on inclusive growth we have consensus. But in every country, public investment has to be more.

Mukherjee also quoted a statement of Chidambaram, in which the Finance Minister said, “Now we cannot resort to price control, because that brings back bureaucracy and licence raj, nor can we suppress demand because we are in a free country. Therefore we have to learn to live with some inflation.” On the statement, Muherjee said, it cannot give a message to crores of people, who are face this inflation, so you have to live with it.

Munjal said there is also a need to contribute focus on rest of the reforms to continue growth - whether it’s labour reform, taxation reform, or it’s a reform where you are lowering the import duties.

Against the question, if critical reforms will take place in next two years, Patel said, we all accepted the inclusive growth.

The budget says that by empowering the agricultural labour, the agriculturists, the working class, the village economy, ultimately the spending power will be enhanced.

Even the FDI in retail or the SEZ reform policy, everything is ultimately linked to growth to create jobs, to create employment, to create an economic environment, which is good for the country. And Chidambaram’s budget was in line with that.

However, Mukherjee said the budget fails to address issues like land reforms.

Munjal said the industry and Government are increasingly trying to work in partnership for the overall objective.

Mukherjee wished the Government would also talk to the trade unions with same frequency as it does with the corporate.

So, the partnership between the Government, the corporate and the trade unions may be strengthened farther for inclusive growth.

Click to play video