Apr 23, 2012, 10.36 PM | Source: CNBC-TV18
Naina Lal Kidwai, country head of HSBC India, tells CNBC-TV18 that the main worrying factor in this Budget is government expenditure.
Naina Lal Kidwai (more)
Chairperson, Max Financial Services |
On the flip side, Kidwai says the FM should be lauded for his fiscal deficit number and his attempt at consolidation through taxes.
Below is an edited transcript of her interview. Also watch the accompanying video.
Q: What is your own assessment of what we can possibly see happen as far as interest rates are concerned, given what's been clearly articulated now as the governments fiscal consolidation roadmap?
Kidwai: I think we should laud the fiscal consolidation number. In itself, the 5.1% is lower and better than what we were all saying yesterday. Pre-budget the consensus was more around 5.3%-5.4%, so we have got an ambitious number.
The question that comes up if this is a credible number. I think we have to give the Finance Minister a chance. Itís not like he hasnít raised taxes; we widely believed he would raise taxes in terms of excise and service tax and that has happened. A 2% increase is major, so he has got some amount of revenue generation coming from there. Widening the service tax net is also the right step and that has happened. So, there is a burden on industry therein.
On the other hand, he has had a pretty light touch in terms of individual investors. He could have come in there as well and increased taxes. Everybody has to bear the pain equally, but he hasnít done that; he has maintained that there has to be consumption demand led growth and that needs to continue.
So in this balancing act, the pain point or the worrying one to my mind is expenditure. It is where government fails typically. It is where things can go beyond control and it is also about where money gets spent badly because it doesn't reach where it should. There was mention of administrative reform, there was mention of Aadhaar and there is mention of using those schemes better. So I guess we are getting better at it, but are we there yet? No.