All eyes are on the Budget now because world fiscal deficit, public debt position and government spending is being watched by everyone says Jim Walker, managing director of Asianomics.
According to him. the RBI has been doing a good job of curbing inflation and guiding the government to deliver a credible Budget, so now it is the government's turn. "If the Budget is not credible, then the markets are going to react very harshly indeed," he said.
He believes taxing the private sector, which is a job generator, is bad way to balance the Budget. "Instead they should look to cut public and government spending," he said.
Below is an edited transcript of his interview. Also watch the accompanying videos.
Q: Do you have high expectations from the Budget this time around?
A: I never like to pen expectations on any Budget, not just the Indian Budget though this year really does matter given where the government is coming from. Its track record has been so pure and last year was an abysmal effort in terms of public finances. Everybody has their eyes are on the Budget now and that has been made all the more important given around the world fiscal deficit, public debt position and government spending are everything that everybody is watching these days. This Budget takes on a measure of untold proportions with regards the importance to the markets this year.
Q: Leading up to the Budget, the action from the government over the last couple of months, does it inspire any confidence in you? The policy paralysis which you alluded to might be on the wane and the government might be just trying to get its act together?
A: I am yet to be convinced that the government is even thinking in terms of fiscal consolidation which would be in our view getting its act together. The market was certainly oversold on India as we would enter the end of the year and our PE was way, way oversold. Of course the RBI made things much better by relaxing the conditions over non-resident Indian deposits and that saw a flood of money coming in which then again assisted the market. So the oversold position in the rupee tended to disappear and the oversold position in the market was also disappearing.
But I am not sure that had anything to do with the government or any of the issues that the government has talked about over the course of the last two months. It says a lot about losing sleep over fiscal positions. But we really haven