Budget Analysis: Chidambaram credible, but not Budget: Mohandas Pai

Below is the edited transcript of his interview to CNBC-TV18.

Q: What is your view on the Budget 2013-2014?

A: The finance minister should be commended for sticking to his 5.2 percent fiscal deficit target because he has demonstrated commitment to bringing down government expenditure and he has cut Rs 1 lakh crore from the plan Budget for this year, which is remarkable. It is very clear that country can do without Rs 1 lakh crore spending.

I am concerned about the fiscal deficit target for fiscal 2014 because he has under provided clearly for subsidies. The oil took about Rs 65,000 crore of fiscal 14, whereas the carry forward oil subsidy from this year alone is Rs 50,000 crore for the third and fourth quarter.

The oil subsidy next year will be at least around Rs 1-1.10 lakh crore, despite subsidy on diesel going away and even if, 40 percent to be given by ONGC and others, one will still have around Rs 40,000-50,000 crore.

So, I think overall Rs 1 lakh crore of subsidy for fertiliser and for oil is under provided in the new Budget. I am concerned about the credibility of the Budget because in last two years the fiscal deficit was missed, the target for subsidies was not met, subsidies exceeded the Budget estimates, the revenues have come below Budget for the last three years and for the next year he has estimated a Budget increase in revenues of 19 percent, 19 percent is enormous when the economy is not growing at all. In the Q3 gross domestic product (GDP) came at 4.5 percent.

Q: From your point of view what would the highlight of this Budget?

A: The determination of the finance minister to stick to the numbers that he provides, determination to cut expenditure, determination to make sure to brings in policies, which will help growth has been the biggest highlight for me. I trust this FM. The earlier FM in the last two Budgets destroyed the economy of this country by bringing in retrospective amendment, ill-advised general anti-avoidance rules (GAAR) and both of them have been reversed by this finance minister. I trust the current Fm to take all right steps to make sure that this year goes well.

The Budget numbers to me are not credible, but the finance minister to me is extremely credible and that’s what makes me happy that he is willing to stick to very hard task to manage the numbers and I think that will restore the investor’s confidence into India.