Click to play videoFinance Minister Pranab Mukherjee presented the first Union Budget of the newly elected UPA government on Monday. Against the backdrop of UPA's election victory, it was being seen as a budget of hope.
But close to 24 hours later, the verdict is mixed. Some see it as a missed opportunity, others as a cautious step in the right direction.
So how do politicians, economists, corporate and global voices rate the Budget? CNN-IBN got representatives from all those sectors on a panel for a special show Rate the Budget, moderated by Rajdeep Sardesai. The show had the panel rating the Budget on parameters like Excellent, Good, Average and Bad and looking at future impact of it.
On the panel were Editor of Economic Policy, Network 18 Vivian Fernandes; Board Member, ICRIER, Shankar Acharya; MP, Biju Janata Dal Jay Panda; Head of CPI(M) Economic Cell Prasenjit Bose; BJP Spokesperson Rajiv Pratap Rudy; Union Minister of State, Communication and Information Technology, Jyotiraditya Scindia; London-based economist Lord Meghnad Desai and FICCI President Harsh Pati Singhania.
Following are the ratings and reasons from the panel:
Shankar Acharya: Rated the Budget as average saying the Fiscal deficit was too large, an opportunity missed on reforms stimulus and added that signals are easy to put, and could have been done.
Vivian Fernandes: The Budget is good. Stock market hasn’t reacted to the substance but the packaging of the Budget. The atmospherics could have been better.
Prasenjit Bose: Average.
Jay Panda: Bad-erage. There are elements in Budget that I welcome like focus on infrastructure but overall, it’s a missed opportunity. It wasn’t a pathbreaking Budget.
Jyotiraditya Scindia: Good. It’s an extension of our policies for social sector, infrastructure and development.
Harsh Pati Singhania: Good. Given the circumstances it was a good Budget.
Lord Meghnad Desai: Below average. This is Left side of the Congress party. It was like the second interim Budget.
Senthil Chengalvarayan: Good. He’s kept the status quo in taxes. That’s a big relief. The direction of taxes hasn’t been tinkered with. Worryingly, the Left may have left the UPA but the Left within the Congress needs to be pleased.
Jyotiraditya Scindia responded to Meghnad Desai and Acharya’s ratings and said the Budget did not have a Left edge to it.
“We are in the middle of a recession. Rs 1, 86, 000 crore fiscal stimuli was given to the economy last year. This has resulted in GDP growth rate. Let’s not expect the Budget to be a Government exercise. Let’s not forget the most prolific statements made in the speech,” he said.
Scindia also said the intra-day Sensex fall had nothing to do with the Budget. “Intra-day swings of Sensex should not be considered for policy-making exercise. It will correct itself in the next few days. We should look at the direction the Government will take. Rs 100,000 crore has been kept aside for investment and that’s a huge amount,” he said.
Over-obsessed with stock markets?
Prasenjit Bose agreed with Scindia and said the Budget is about income, expenditure and deficit of the Government and should remain just that. “Why are we so obsessed with the stock markets when there are many other markets in the economy? Why are we so worked up if the Sensex has fallen?” he questioned, “FIIs have been pulling out of India for the past one year because they have messed it up in the US,” he said.
But Jay Panda said restoring a nine per cent growth rate wasn’t possible without keeping the stock market sentiment in mind. “6.8 per cent fiscal deficit just at the Centre is a very scary figure. Lots of opportunities were given up on how to do this in radically different manner so that benefits could reach the citizens,” he said.
Lord Desai believed Pranab had taken a gamble with this Budget having ignored the foreign investors.
“What the Budget should have set was a roadmap for the next five years plus income and expenditure. What it shows is that the government doesn’t care for Sensex, doesn’t care for the Wall Street. It cares more for rural India. That’s a gamble because you still need foreign money,” he said.
Scindia pointed out the development policies of the government – 144 per cent hike in NREGA budget – would help the marginalised sections of the society.
Budget must indicate the direction of economic policy, said Acahrya, and that this is where Pranab’s Budget fails. Singhania said fiscal deficit was worrisome but we had no trade-offs. “I think Pranab opted for growth despite there being a high fiscal deficit. I would support his choice on behalf of the industrialists. Government can achieve its desired revenues only through goals,” he said.
But the real question mark remains over disinvestment. Will the Government go ahead with it under pressure from allies like the Trinamool or the DMK?
Jyotiraditya said there was unequivocal support for disinvestment. “FM has made clear that disinvestment will take place in companies across the board up to 51 pc with the exception of insurance and banking companies where it will remain in public sector. I think the intent matters more than the numbers”.
Where’s the money going?
Vivian pointed out that investors wanted a reassurance that the Leftist tendency with the Congress hadn’t gained an upper hand. To which Scindia replied that there was no sacrosanctity of a number being put out. “Most important thing is that a commitment and intent has been made clear and we will do it when we get the best price for our assets,” he said.
Prasenjit Bose said the Left was opposed to the concept of profit making public sector units in toto because they bring dividends.
“You are using an income stream for future by selling off a stake. So why give up that? What is the difference between a fiscal deficit and a disinvestment process?” he said.
Senthil offered clarity to Bose by citing Maruti’s example. “When they (Maruti) disinvested, they got Rs 30 per share. When they sold its stake to Suzuki, they got Rs 250 a share. After Suzuki ran the company for some time and government got its stake, they got Rs 600 per share. So the income that came in far outweighs that may have come from a company that could have gone down the drain,” he said.
Jay Panda remained adamant on applying money properly. “Even former PM Rajiv Gandhi noted that only 15 paise of one rupee reaches the common man. There have been radical ideas in the Finance Ministry which I am disappointed Pranab babu did not make use of,” he said.
Scindia said what Panda pointed out was not just a Central problem, but also a state problem and cannot be expected to be solved overnight.
The Government claims it’s a growth oriented budget that’s stimulating positive demand.
BJP’s Rajiv Pratap Rudy expressed confusion at it and said it was a lacklustre Budget. “On the one hand they are tom-toming reforms in infrastructure, agriculture etc. But if you wanted to do this, it must have been complemented with reforms. But when you’re not putting the reforms in place, how do you complete this (fiscal deficit) aspect? How to bridge this gap?” he questioned.
But Acharya said it was tough to believe that Pranab’s calculated risk would pay off. “If the Government will borrow Rs 400,000 crore in the market, it will keep the interest rates higher. This will discourage private investment and hence growth can’t be achieved,” he said.
Senthil said it was a gamble that Pranab had taken which may or may not work out.
Panda too agreed. “When you put representatives of India Inc on TV and ask them to rate the Budget you are putting a gun to their head and they will give a political answer. These people vote with their money in the market. Unless that sentiment is turned around, I worry they’ll have trouble getting back to nine per cent growth rate,” he said.
However, Scindia denied this allegation vociferously and Prasenjit Bose remained adamant that the Government had missed an opportunity.
What lies ahead?
Shankar Acharya: There were two good things about the Budget speech: Goods and services tax by 2010 and restructuring of fertilizer subsidy.
Vivian Fernandes: The reformer shouldn’t lose hope because the Government is committed to it.
Jay Panda: Being a regional party member, I would like to see less bias in Budget when it comes to regions.
Prasenjit Bose: Mandate is for aam aadmi (common man), for agriculture, for development, for health – don’t betray it.
Rajiv Pratap Rudy: The Budget did not talk much about price rise and poverty. The middle class is disappointed.
Jyotiraditya Scindia: Look at how we have preformed in last five years. It’s an indicative of how well we will perform in the years to come. We are committed to reforms, social sector and agriculture.
Senthil Chengalvarayan: I would like to see delivery mechanism for social sector reform.
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