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27 Feb 2013 - 16:00hrs hrs

Latha Venkatesh | Banking Editor


Discuss the Economic Survey

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harshadmeena: What are your expectations from tomorrow`s budget?
Latha Venkatesh: I have hopes rather than expectations. I hope the deficit is cut. I hope we cut our subsidies, but this cant be done in the budget. The budget will only annoucne a lower bill. The govt has to keep hiking fuel prices. Also I expect they will cut plan expenses. Doubt they will raise too many taxes..May be only excise duties will go up from 12% to 14%
pnjkrishnan: Madam, Based on the Economic survey report what one can expect from the FM, Direct tax and Indirect tax and black money ?
Latha Venkatesh: You cant make such guesses from the Eco Survey. That document merely states the position of the economy as of now. I suspect he is going to increase indirect taxes. I doubt he will do anything to control black money. But he may be able to goad the tax authorities to sue their technology to cross check and cath more evaders. Again this is a matter of tax adminsitration. The budget cant do much about it.
ihalder001: Everytime govt do something called reforms & tell that effect will see in near future. But why we see so much of BPL people, uneducated, unhealthy people even after 20 years of first reform ?
Latha Venkatesh: I completely agree. What it means is we have poor governance.But reform has reduced some kind of problems. I dont know if you were around 20 years ago. We had only MTNL telephones and their corrupt linemen used to deliberately keep your lines dead and extract money. After the "reform" that is getting pvt sector into telecom, we could make calls on our mobiles at 15 paise. You may argue that techonolgy is more useful than reform. I wont dispute that.
harshadmeena: Hello madam, what do you think were the key takeaways from economic survey?
Latha Venkatesh: That we were wrong in cutting taxes and itnerst rates soon after the Lehman crisis. That along with poor infrastructure pushed up inflation. The answer now is to cut deficit. That is, govt expenditure must not overshoot govt revenues. Also we need to charge the right price for disel and petrol and LPG so that people consume it sensibly . A reduction in such consumption ( because of the higher prices) will bring down our oil import bill. These are the main takeaways from the survey.
prmaisha: cant we lift out all the taxes & only impose 50% tax on industries of their profit & income of individuals exceeding 5,000,000
Latha Venkatesh: No we cant. This is not a year when we can forego taxes. We need the money. Secondly, dont be under the impression that you can bring about equiality through the tax system. You can`t.You will only increase the "black" economy.
sanjeevsamal: only 2 issues warrant attention, fiscal deficit & current account deficit
Latha Venkatesh: I agree. I would say they warrant maximum attention. Faster adminsitrative clearances are also impt.
sampadyam: Why a fall in domestic saving led to widening current account deficit?
Latha Venkatesh: When savigns fall, banks get fewer deposits. They have to pay higher interest on deposits, so they charge higher on the loans they give. Indian business men prefer borrowing from aboroad. Either they take foreign currency loans or exporters and importers take suppliers credit from their counterparts.In tehse and other ways a fall in savigns gets filled in by higher cash flows from abroad.
Latha Venkatesh: I doubt it.I hope they are serious about a real estate regulator. But you dont need a budget to introduce such a regulator.
kumarrajesh21: hi Lata I am very impressed with ur style of anchoring u appear to be very knowledgeable what r ur expectations from the budget and do u think market will make a upmove after the budget
Latha Venkatesh: Thank you. I expect the budget will make a bold statement on cutting subsidies, and even some plan expenses. But that doesnt mean the markets can rejoice too much...This is for two reasons: one: when govts spend less in the short run the economy suffers. If the govt spends 100 rupees less, the economic output will fall by 55 rupees. Logivcally , therefore a cut in govt expsnes while welcome in the long run, will immediately reduce corproate profits and hence stk markets will fall may be after a lag of a few days. Secondly, mkts also respond to global trends. If the global investors are running away from equities for reasons unconnected to India, our budget can`t stop that.
pnjkrishnan: Madam, Why is economic survey is silent on SALE of few PSU ? especially loss making Ratanas, Govt can get good amount by way of selling loss making PSU? Your views,
Latha Venkatesh: No Sir, govt can`t make much money or indeed any money by selling loss making units. Also there will be political backlash. The loss making units could have politically powerful labour unions who may sabotage the working of the company altogetherbecause they dont want to move from govt to a private employer who may simply discard unprofitable divisions. Divestment isn`t all that easy.
daddy22: What does the economic survey say about the burgeoning current account deficit ?
Latha Venkatesh: It is extremely worries about the current account deficit. Says we have pay the correct price for fuels : for diesel, LPG petrol and kerosese. At higher prices we will economise our consumption and our import bill will come down. That`s one cler way to reduce curr acct deficit.
sendvr: everyone keeps talking about how bad the state of economy is etc, but all the parameters that measure health of the economy are not too bad,compared to our global peers. Is is just about news channels sessationalising economic matters?
Latha Venkatesh: When a person earning 20,000 dollars a years sees his growth dropping to 1% or 2%, his income is growing by only 200 to 400 dollars a year. When a person earning 700 dollars grows by 4% instead of 8%, his annual income increases by 28 dollars, against 56 dollars previously. That hurts a lot. We need to see the base. Percentages hide a lot. Comparing India with the european and otehr developed countries is tricky. We have to be pained by our slower growth because at curent levels we are desperately poor by any standard. The west needs to be less concerned about their slowdown, because the current level is not a desperately bad one.
daddy22: Will the budget tomorrow reflect the concerns laid out in the economic survey ?
Latha Venkatesh: Yes sure it will.
pnjkrishnan: Madam, Inflation is eating Middle class savings, Why no suggestion in the Economic survey for beating inflation with higher returns products.
Latha Venkatesh: It`s not the survey`s job to suggest products. But it has highlighted the disastrous impact of inflation. Something may come in the budget to encourage savings.
rnp_111: Hello mam, do you expect anything good from Union Budget for "Aam Adami".?
Latha Venkatesh: No sir. In the short run, if it is a good budget, all of us suffer. In the longer run, if it is a good budget, the aam aadmi will be faced with lower inflation and eventually better job prospects.
s25: How do u see this budget for Indian Economy ?
Latha Venkatesh: It can take the economy futher downhill or it can stop the slide somewhat.

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