ET NowIn a chat with ET Now, Mythili Bhusnurmath, Consulting Editor, ET NOW, shares his views on the Budget. Excerpts:
ET Now: Could you drill the budget down to three specific trends or directional cues which underline the strategy that the government will be adopting to managing its finances?
Mythili Bhusnurmath: It will be difficult to pin it down to three, but basically I will talk about the three takeaways and then we will talk about whether it is positive or negative.
The first is the quality of the fiscal consolidation or adjustment that has been carried out, since it cannot be called a fiscal tightening. We will talk about the quality of it and also about the budget arithmetic. The second aspect is steps taken for foreign institutional investors in particular, and overseas investors in general and also the portfolio investors. The third is a stated push for public investment.
Now, as far as a qualitative fiscal adjustment is concerned, it is certainly not as was desired, because of the ratio of revenue deficit. It means there is no attempt on the part of the government to improve the quality of the fiscal deficit. They said they are going to push public investment and will try to do more by way of public investment in a bid to crowd in private sector investment, but that has not happened. In fact, the government will be spending even more from its revenue side borrowing. Therefore, the quality of the fiscal correction, even the slight relaxation, just does not bear up with what the government has said.
As far as the fiscal arithmetic is concerned, they have been hugely optimistic on the revenue side - whether it is tax or disinvestment. They have been fairly conservative as far as expenditure is concerned. Therefore, my fear is that next year will see the same kind of expenditure compression of the wrong kind. This means they will squeeze capital expenditure and continue with revenue expenditure. So, I am not happy at all with what they have done on the fiscal consolidation side.
As far as FIIs are concerned, the markets really needed a reason to be happy. The composite cap for FDI and FII, the exemption from MAT, the talk about permanent establishment and the last, they have talked about public investment. However, if you look through the numbers very carefully, all there does not seem to be that much evidence of government putting its money where its mouth is. I do hope the government will prove me wrong because it would be in the interest of this country that I am proved wrong.
ET Now: Could you drill the budget down to three specific trends or directional cues which underline the strategy that the government will be adopting to managing its finances?
Mythili Bhusnurmath: It will be difficult to pin it down to three, but basically I will talk about the three takeaways and then we will talk about whether it is positive or negative.
The first is the quality of the fiscal consolidation or adjustment that has been carried out, since it cannot be called a fiscal tightening. We will talk about the quality of it and also about the budget arithmetic. The second aspect is steps taken for foreign institutional investors in particular, and overseas investors in general and also the portfolio investors. The third is a stated push for public investment.
Now, as far as a qualitative fiscal adjustment is concerned, it is certainly not as was desired, because of the ratio of revenue deficit. It means there is no attempt on the part of the government to improve the quality of the fiscal deficit. They said they are going to push public investment and will try to do more by way of public investment in a bid to crowd in private sector investment, but that has not happened. In fact, the government will be spending even more from its revenue side borrowing. Therefore, the quality of the fiscal correction, even the slight relaxation, just does not bear up with what the government has said.
As far as the fiscal arithmetic is concerned, they have been hugely optimistic on the revenue side - whether it is tax or disinvestment. They have been fairly conservative as far as expenditure is concerned. Therefore, my fear is that next year will see the same kind of expenditure compression of the wrong kind. This means they will squeeze capital expenditure and continue with revenue expenditure. So, I am not happy at all with what they have done on the fiscal consolidation side.
As far as FIIs are concerned, the markets really needed a reason to be happy. The composite cap for FDI and FII, the exemption from MAT, the talk about permanent establishment and the last, they have talked about public investment. However, if you look through the numbers very carefully, all there does not seem to be that much evidence of government putting its money where its mouth is. I do hope the government will prove me wrong because it would be in the interest of this country that I am proved wrong.
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