Mumbai: Even though the Union Budget for 2010-11 has performed a fine balancing act between fiscal prudence and economic recovery, its consumer-led, instead of investor-led, approach to growth may be a weakness. Inflation must be lowered and priority given to health, education and agriculture to set the economy on the path of double-digit growth.
These were among the observations made at a discussion organized by Mint in Mumbai on Friday. The event, whose theme was Beyond Budget: The India Agenda, marked the finale of Mint’s five-part discussion series on the Budget spread over four cities and five weeks.
The panellists included Ashok Chawla, finance secretary; O.P. Bhatt, chairman, State Bank of India; Rakesh Mohan, former deputy governor, Reserve Bank of India; M. Damodaran, former chairman, Securities and Exchange Board of India; R. Gopalakrishnan, executive director, Tata Sons Ltd; and Sanjay Nayar, chief executive, KKR India. Tamal Bandyopadhyay, deputy managing editor, Mint, moderated the discussion. Edited excerpts:
First, it is very important to recognize the excellence of India’s overall macro management. Given the kind of crisis that we had in late 2008, we were able to respond in a fashion that provided one of the best recoveries in the world along with China... This gives us the optimism that we can actually achieve 9-10% growth in the medium and long term.
(But) the government has to cut down its borrowing. We should then enable resources going to the private sector which will bring the kind of growth that we wanted to. That is (the) number one need... Unless inflation comes down to 2-4-5% on a sustainable basis, it will be difficult to have the kind of investment programme that you need to have 9-10% growth.
...I would very much like, as a citizen, to see an attitude of productivity to expenditure. The government must see whether it is getting the proper and better bang for its buck or not... The time has come to shift the focus to health, education, legal issues and those ministries must have a higher profile... Please do whatever you can to put money in consumer’s hands because if consumers don’t spend, we are not going to get growth.
We need for agriculture, what (then finance minister) Dr Manmohan Singh did in 1991 for the industry—a massive dismantling. At $3,000 (around Rs1,37,400) per capita on a PPP (purchasing power parity) basis, we are where America was in 1955 and what happened in the US between 1955 and 1975 is going to happen (in India) in the next 20 years—government or no government. But the government can be with it so we will look forward to that.
I don’t know (if) the Budget...will take us to a sustainable double-digit growth. For that, we need to depend on lot of short-term things coming together very well without anything going wrong... This Budget is consumption-led and not investment-led. Given the aggressive targets on non-Plan revenue expenditure, non-Plan revenues and subsidies…we all know risks are going to be there. And the fact that we will have aggressive divestments make this Budget a lot more market-dependent than one would have wanted.
...Oil price shock, bad rains or lack of equity markets…you can fall short of certain targets. It doesn’t do much in improving structural liquidity in the system, I mean financial sector reforms...
...There are several positives. But there are some missed opportunities... Interestingly, in terms of transparency and accountability there are a number of paragraphs. I tried to figure out how a new symbol for rupee would fall under this. I am still working on that...
I was (a) little disappointed with one para. It’s a one sentence, para 147, which somehow is not consistent with expectations. It says, “similar attention needs to be paid to related sectors such...horticulture, dairy, poultry, meat, marine and aquaculture.” In one sentence you have disposed of all the allied sectors. What have you promised them? Similar attention. What is similar treatment? Like that of agriculture...
I see India growing at 8, may be 9 and possibly even 10% in the next 5-8-10 years and the Budget has done everything to make it sustainable... Another thing is how inclusive this growth is. The number of districts in this country which are getting infested with all kinds of violence like Maoist and terrorist are all functions of poverty. If we do not make efforts to make this growth inclusive then we may not be safe in our cars and houses.
Fortunately, it is being made. But when that effort is being made, in the banking system we require 15-20 lakh barefoot bankers in villages across the country equipped with technology...
...The manufacturing sector is showing a renewed vigour and energy, but the sector needs to be in the process of economic development because it needs to provide employment to a large number of people. The government is engaged in preparing a policy for the sector, this policy will focus on acquiring raw material assets abroad.
It is important that agriculture and agriculture-related activities are put on a sound footing. The contribution of agriculture to GDP (gross domestic product) is very low. The power sector has a pride of place in infrastructure...but on the transmission/distribution (side) there is a huge gamut of activity which requires not just the right kind of policy but the actual implementation and delivery on the ground.
The third point is education. Unless our young population is appropriately educated and has the right kind of skill sets, we will continue to have mismatches. We, therefore, have the skill development mission. The fiscal health of the economy is also very important...
Photos by Abhijit Bhatlekar / Mint