What me worry? Scriptwriters urge India Inc to look deeper

Those In The Hot Seat Defend The Budget, Allay Fears Of A Ballooning Fiscal Deficit

NOWbrought together policy makers, political leaders, businessmen and ET editors in a high-powered panel discussion on the Budget at prime time Monday evening. There was broad consensus that the markets had misunderstood the FM and the reaction of the Sensex was seen more as an aberration than an indicator of the quality of the Budget. Said deputy chairman of the Planning Commission, Montek Singh Ahluwalia: "I don't think what happens to the Sensex for a few hours after the Budget means anything. This is intra-day trading. I don't think it's a relevant signal as no serious investor will look at investing in the markets during or immediately post the budget."
    Kotak Bank MD and VC Uday Kotak said the Budget needed to be examined at two levels. He thought that when it came to stimulating domestic demand, the Budget had been extremely positive, However, he believed there was more support needed for capital formation, which had not been addressed in this Budget.
    The fact that the Budget had not addressed specifics in the area of disinvestment, which has been seen as a big dampener by the markets, was something that revenue secretary PV Bhide thought was an overreaction. He pointed out that disinvestment has been mentioned and would take place in due course, adding specific targets would have been criticised as excessive or too less, either way.
    While the government was silent on the FDI regime, finance secretary Ashok Chawla said India's FDI regime was open and most sectors have 100% FDI, while very few had sectoral caps. There was no need to state that over and over again, he said.
    Mr Chawla acknowledged that the government's borrowing programme will be a challenge. "The market was aware that the fiscal deficit would be high. The net borrowings stand at about Rs 4 lakh crore. The market will not have the appetite to borrow the entire amount as it will only upset the apple cart. What we are working on along with the RBI is to have open market operations of 50% of the net borrowing. So close to Rs 2 lakh crore will be raised through open market operations."
    Mr Bhide reiterated that GST will be implemented by April 1, 2010.
    Mr Ahluwalia acknowledged that there was the possibility of a downgrade by rating agencies but appeared not to ascribe much importance to their actions. "Countries around the world are running high fiscal deficits. But the question is whether there is an exit strategy to help reduce the deficit over a two-to-threeyear period as the world economy recovers. The bottomline is that the fiscal deficit is high and one must not be defensive about it this year. Will we be able to bring it down, and the answer to that is 'yes'."
    "Rating agencies have known to be wrong in the past. The UK government has just been downgraded by rating agencies. Getting downgraded is not a matter of concern," he said.
    ET NOW consulting editor Swaminathan Aiyer, said the government had shot itself in the foot as it had not created an appropriate mood in the market. This in turn would result in the market not taking an active part in the disinvestment plan. "Markets are also to blame because they went mad after the elections," he said.
    Editor (opinion) at The Economic Times MK Venu felt the Budget has not been negative on any section although businesses expected excise duties to be rolled back, a measure that did not materialise. Subsidies, Mr Kotak felt, were facing pressure on the revenue front though if India continued to hold out well, there would be an upside on the revenue front.
    CPI (M) MP Neelotpal Basu added, "Unfortunately, the incremental expenditure outlay of GDP is too small to provide impetus for growth and is not beneficial for the poor as health and education expenditure was too little."
    ET NOW

THE MARKET WAS AWARE THAT FISCAL DEFICIT WOULD BE HIGH. NET BORROWINGS ARE AT ABOUT RS 4 LAKH CR. IT WILL NOT HAVE THE APPETITE TO BORROW THE ENTIRE AMOUNT. WE ARE WORKING WITH RBI TO HAVE OPEN MARKET OPERATIONS OF 50% OF THE NET BORROWING ASHOK CHAWLAUNION FINANCE SECRETARY

THE BUDGET NEEDS TO BE EXAMINED AT TWO LEVELS. WHEN IT COMES TO STIMULATING DOMESTIC DEMAND, IT HAS BEEN EXTREMELY POSITIVE. HOWEVER, MORE SUPPORT IS NEEDED FOR CAPITAL FORMATION, WHICH HAS NOT BEEN ADDRESSED IN THIS BUDGET UDAY KOTAK KOTAK MAHINDRA MD & VC

I DON'T THINK WHAT HAPPENS TO THE SENSEX FOR A FEW HOURS AFTER THE BUDGET MEANS ANYTHING. THIS IS INTRA-DAY TRADING. NO SERIOUS INVESTOR WILL ACTUALLY LOOK AT INVESTING IN THE MARKETS DURING OR IMMEDIATELY POST THE BUDGET MONTEK SINGH AHLUWALIA DEPUTY CHAIRMAN PLANNING COMMISSION

THE IMPRESSION THAT THE BUDGET HAS NOT ADDRESSED THE SPECIFICS OF DISINVESTMENT, IS AN OVERREACTION
    PV BHIDE
    UNION REVENUE SECRETARY