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Kabhi Na Kabhi to Ayega

Omkar Goswami


People usually act as they are. You don’t see braggadocio from the humble; those with vertigo don’t traipse at the edge of cliffs; nifty dressers are rarely unkempt; and careful, long-standing politicians don’t brandish ideology on their sleeves.

So, too, Pranab Mukherjee, who presented yet another Union Budget. He is a careful man; understands finance; knows what he can and can’t do, and his party’s expectations; doesn’t seek corporate sector praise; hates declaiming at the pulpit; and realises that the budget is but one instrument of economic policy-making — and not necessarily the most important. Once you see Mukherjee so, you will appreciate that the Union Budget for 2010-11 is so like him.

Mukherjee knew that he had to bring the fiscal deficit back in line. That meant a gradual roll-back of some of the earlier stimuli. But in a calibrated way, without choking off growth. Without taking away the centrality of major social sector expenditures and outlays on physical infrastructure. And with some goodies hidden in the closet.

What does he do? He keeps a tight leash on expenditure. At Rs.1,108,749 crore, total expenditure for 2010-11 is only 8.5 per cent above the revised estimate of 2009-10. Oh, yes. He makes the right sounds: provides Rs.173,552 crore for infrastructure; and Rs.137,624 crore on ‘inclusive development’. Some of these get big hikes in outlay. But, in real terms, the total budgeted expenditure of the central government will be only marginally greater than the revised estimate of 2009-10.

He then gives some and gets some. The ‘gives’ are in personal income taxes, where he does a tax slab creep for some categories; grants relief by marginally increasing deductions; cuts the surcharge on corporate taxes from 10 per cent to 7.5 per cent; and increases tax deduction on R&D. The ‘gets’ are raising the Minimum Alternate Tax from 15 per cent to 18 per cent on book profits; rolling back excise duties on most products from 8 per cent to 10 per cent; hiking the customs duty on crude oil to 5 per cent; on diesel and petrol to 7.5 per cent; on other refined petroleum products to 10 per cent; and raising excise duty on petrol and diesel by Re.1 per litre.

Mukherjee loses Rs.26,000 crore of revenue on direct taxes; and gains Rs.43,500 on indirect. Up by Rs.17,500 crore.

A tight control on expenditure. Some roll back of stimuli. And two more goodies. The said is Rs.40,000 crore on disinvestment in 2010-11. And unsaid is the revenue from 3G auctions, which is sure to occur in 2010-11, and at least another Rs.40,000 crore. There are other upsides. In all likelihood, India’s nominal GDP at market prices will rise by more than 12.5 per cent, which is the assumption in the Budget. I expect a growth of at least 14 per cent — which gives a 1.5 percentage point kicker not only in the denominator, but also in tax collections. I won’t be surprised if revenue collections went up by 20 per cent instead of the projected 17.9 per cent.

Add these, and you get a marvellously understated budget — one with a 95 per cent probability of overshooting its targets, and may well produce a fiscal deficit of 5 per cent of GDP in 2010-11, instead of 5.5 per cent.

That’s Pranab Mukherjee for you. Under-promise, and hope to over-deliver. Cut the drama. Hold some serious upside close to the chest. And realise that reforms don’t begin and end with the last working day of February.

At 43, I may have been impatient with the lack of drama. At 53, I am impressed.

Published: Business World, March 2010


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