Finance Minister Pranab Mukherjee has chosen the path of being incremental and presented a more pragmatic Budget, reflecting the current political reality in the country.
With lower than estimated corporate tax collection due to muted corporate profits, higher international oil and commodity prices than what was planned for, lower disinvestment proceeds due to volatile capital markets and a pretty stubborn expenditure bill, the finance minister has very little elbow room. This has resulted in the fiscal deficit to balloon to 5.6 per cent of the GDP. His determination to bring down the fiscal deficit to 5.1 per cent is certainly commendable and critical for the long term sustenance of the economy.
I just hope that the actions planned to achieve the fiscal deficit targets like the market divestment of the Central Public Sector Undertaking can be achieved given the volatility of the capital markets.
On the expenditure side, he has focused the effort towards better delivery which will certainly help in minimising the leakages in the system.
The government's intent on limiting subsidies to two per cent of GDP is also a significant commitment that will help the fiscal balance in the years to come. The allocation of higher capital spending in social sector schemes and facilitating higher financing limits for the infrastructure sector will certainly assist in infrastructure creation.
In summary, the finance minster has tried to be consistent in his approach without showing much risk appetite and played within himself to balance the books.
Koushik Chatterjee Chief financial officer, Tata Steel