BackBudget 2014 lacks ‘wow’ factor: Jim O’Neill
O'Neill says he had and has very high expectations of the Narendra Modi government
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Mumbai: Jim O’Neill, the former chairman of Goldman Sachs Asset Management Co. and the man who coined the popular acronym BRIC (Brazil Russia, India, China), says the first budget by the National Democratic Alliance (NDA) government lacked the “wow" factor.
“In some ways, I find it a little bit disappointing, but that’s probably because I had and I have very high expectations of the (Narendra) Modi government," O’Neill said in a phone interview from London.
“There’s nothing wrong in the budget.. (but) I don’t really see any ‘wow’ factor," said O’Neill, adding that the government could have been bolder in its approach to the budget.
“There was nothing particularly different about the budget," he said.
While finance minister Arun Jaitley, who presented the government’s maiden budget on 10 July, stuck to the 4.1% fiscal deficit target set by his predecessor P. Chidambaram for the current fiscal, some investors have questioned the math behind the fiscal numbers.
Projected growth in tax collections is being seen as too optimistic, and the lack of any clear cut moves to bring down subsidies has also left some disappointed.
“They haven’t done anything about any subsidies, it is not clear why is the deficit going to decline, unless growth accelerates shortly," O’Neill said.
Yet, India could grow at 8-10% or more in the second half of the decade, O’Neill added.
In the economic survey released last week, the government said that it expects Asia’s third-largest economy, which has been growing at the slowest pace in a decade, to expand between 5.4% and 5.9% in the fiscal year 2015.
Some of the disappointment voiced by O’Neill has also been reflected in the performance of the equity markets over the last one week, when the budget was presented.
The Sensex shed 3.6% this week—its biggest such loss since December 2011.
To be sure, a pull back in global markets also contributed to some of the losses.
Besides, the Indian markets are still up 18.2% year to date, on the back-up foreign institutional investors’ (FIIs) inflows to the tune of $11.2 billion.
India also remains the best performing market among BRIC and MINT (Mexico, Indonesia, Nigeria, and Turkey), the acronyms popularized by O’Neill.
The BRIC grouping was created by O’Neill in a 2001 in a paper titled “Building Better Global Economic BRICs".
The term became a symbol of a shift in global economic power towards the emerging economies from the developed G7 economies of the US, Japan, France, Germany, Italy, the UK and Canada.
The term MINT was originally coined by Fidelity Investments.
Among these countries, while Brazil’s Bovespa Index has posted a 6% gain so far this year, Russia’s RTS Index and China’s Shanghai Composite Index has dropped 4.1% and 3.3%, respectively.
Key equity indices among MINT countries are in positive territory so far in 2014, with Indonesia’s Jakarta Composite Index and Turkey’s Borsa Istanbul 100 Index having climbed 17.7% and 17.1%, respectively, while Mexico Bolsa IPC Index and Nigeria’s All-Share Index have posted gains of 2% and 3.6%, respectively.
Despite the outperformance of the Indian markets so far this year, O’Neill is still overweight on India.
The country is “in early stages of a structural re-rating", he said, adding that he still hopes the government will meet the high expectations.
“The government only had six weeks to prepare this budget, so I continue to have high expectations and hopes," said O’Neill.
“I would be positive still on India," he said, adding that India ranks third in O’Neill’s order of preference in emerging markets.
China is O’Neill’s most preferred market, followed by Indonesia, which will also hold elections this year.
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