Restore investor confidence, say economists

Amid sagging business outlooks from various chambers, economists on Wednesday told finance minister Pranab Mukherjee that Budget 2012-13 should restore the confidence of investors.

In their pre-Budget interaction, they also asked Mukherjee to make the Budget a policy one, rather than only a statement of accounts.

Another demand was fiscal consolidation, considering the fiscal target of 4.6 per cent for 2011-12 had gone haywire, with dismal revenue from disinvestment and the low direct tax collections.

Among leading economists who attended Wednesday’s meeting were Surjit Bhalla from OXUS Research &Investments, Nitin Desai and Rajiv Kumar from the Federation of Indian Chambers of Commerce and Industry, M Govinda Rao and Sudipto Mundle from the National Institute of Public Finance and Policy, Bharat Ramaswamy from the Indian Statistical Institute, Delhi; Ajit Ranade from the Aditya Birla Group; Rohini Somanathan, Delhi School of Economics and Amar Yumnam from the School of Social Sciences, Manipur.

Govinda Rao told Business Standard he had suggested immediate action on controlling fiscal deficit. “The Budget should give a clear signal for the revival of the economy,” he said. Surjit Bhalla said the Budget needed to get rid of populist measures. “Given the high fiscal deficit, the government needs to increase prices of subsidised goods like food, fertilisers and diesel,” he said, adding the high inflation was due to the populist measures and an increase in procurement prices.

The economists also sought diesel decontrol, a higher excise duty on diesel cars and a cash transfer system to distribute subsidies directly to beneficiaries. Bhalla said the Food Security Bill would be a major disaster, while Rao said though it would become an Act, cash transfer was a better way to implement it.