India Inc's money rides on Chidambaram's Budget

FM will strike a balance between politics and economics: BS poll.

India Inc is willing to put its money on finance minister P Chidambaram to deliver the goods in his Budget expected early next month, though opinion is divided over interest rates hardening in the near future, taxes being raised in the Budget and foreign direct investment caps being rolled back, says a CEO poll conducted by Business Standard.

A large majority, 86 per cent, of the 50 CEOs polled were optimistic that Chidambaram would strike a balance between prudent politics and good economics and soon present another "dream Budget."

While 52 per cent of the CEOs polled said they were optimistic that Chidambaram would deliver the goods, 34 per cent said they were extremely optimistic. Only 14 per cent expressed any reservations about Chidambaram's ability to deliver.

The CEOs polled in Mumbai and Delhi represent sectors like automobiles, retail, banks, steel, pharma, consumer electronics, cement and FMCG.

Almost half (48 per cent) of the CEOs polled said they were nervous about interest rates heading northwards in the days to come as the government was expected to launch a slew of high-expenditure programmes targeted at the rural poor.

At the same time, the decision to put off all divestment by at least a year is expected to put pressure on the fiscal deficit and lead to a rise in interest rates. However, 52 per cent of the CEOs said they were optimistic interest rates would not rise.

A majority of the CEOs, 52 per cent, said they were nervous about taxes being raised in the Budget, especially those on corporates. In order to fund its higher outlay on the rural sector, businessmen expect the government to raise new taxes.

As the Congress-led alliance came to power on the what-did-the-common-man-get-from-the-NDA-rule platform, it is unlikely to tinker with income tax. The axe, it is being felt, might fall on corporates.

While 54 per cent of the respondents felt there would be no going back on FDI, 46 per cent of the CEOs said they were nervous about the new government's policy.

During the last couple of months of the National Democratic Alliance government's rule, there was widespread expectation that FDI would be liberalised in three areas: telecom, civil aviation and retail.

But with the Left parties taking a stringent line on FDI, a section of industry sees as unlikely any movement forward.

Naturally, all eyes are on Chidambaram and his Budget.