See multiple positive surprises this Budget: CII's Munjal

Sunil Munjal, chairman of CII's Economic Policy Council speaks to CNBC-TV18's Shereen Bhan to give his hopes and expectations of the Union Budget.

Below is an edited transcript of the interview. Also watch the accompanying video.

Q: The big idea this time around could perhaps be the Food Security Bill. There are question marks and apprehensions on how he is actually going to finance it. He hasn't been able to come up with recedes on the disinvestment front. It is the first planned year of the 12th plan and automatically we will see expenditure going up. Is the food security idea going to be the big ticket scheme this time around you think?

Munjal: I am hoping he will surprise us and do more than just food security. As you are aware the CSO advance estimates came out today and the number they have given for GDP is 6.9%, which by itself is along expected lines. But the worry is agriculture which they have said is likely to be 2.5%. Food security also means additional collection and distribution of food; it's not just a number. So on one hand is the fiscal requirement to be able to fund it, second is the practical requirement of being able to grow and distribute this.

There is a serious amount of work which needs to be done on the agriculture policy both in the states and at the center, whether its getting them to agree to a model APMC Act and there are whole host of issues, land ownership, land transfers around agriculture. There is serious work which has to be done and if we are going to have a bill of this nature, we are going to have to find the resources to fund this as well.

We have no fiscal headroom at present. So, we need to create that fiscal headroom. We will also need to widen the tax base, not just keep the rates where they are or lower them for better compliance. We have no choice but to widen the tax base as well. So, we will have to work on both.

Q: In terms of the reform agenda and from an intent point of view, what do you think the government is going to prioritize and focus on?

Munjal: One of the things which has happened this year is that they have moved the date of the Budget to be post the state elections. Since state elections will be over, he may not make any single big bang announcement, but I think of the number of issues which are pending, he is going to pick up chunks of those and make those as announcements in the Budget. This is why I am hoping for a positive surprise; not just one, but I think we will see more than one announcement come in this Budget.

Q: Infrastructure is likely to be another area of focus as far as Budget 2012 is concerned. Tax concessions as far as infra bonds are concerned, the infra debt fund, clarifying certain issues with regards to the infra debt fund, perhaps those will be areas that he would like to clarify. But things like the power sector, at this point in time looks absolutely abysmal. Now the PMO's office is trying to take charge of that situation. On infrastructure specifically what do you see the finance minster saying this time around?

Munjal: We have seen two or three successful bond issues in recent times. They will certainly take advantage of that and push more and more of the infrastructure companies and public sector companies to move in that direction. We have three different options right now. One is the minority stake entities and there are other non-strategic businesses that the government is still invested in, in which it could easily cash out. Even if they don't cash out completely from equity, they have huge assets like land banks sitting in many of these companies and those can certainly be en-cashed. I am not sure why we have not even thought about it.

Q: Corporate India seems to have adopted this mindset where the fiscal deficit should be bridged by way of divestment. But fundamentally, that can only take us so far. He has to look at streams that generate revenue because disinvestment can only take us so far.

Munjal: I don't think there is an argument. To my view, has to find a way to push for growth, he has to find a way to prune expenditure and he has to increase revenues by widening tax base. And it's not that if he can do one at the cost of the other, there is no option, you have to do all three of them.

This willy-nilly means looking at subsidies once more sharply. You cannot eliminate subsidies, that's accepted now, but you can target them better with Aadhar getting rolled out. I think certainly you have the tool available and if the intent is there I think it's certainly possibly now to have a much sharper focus. Even doing dual pricing of products, which we have always discouraged because it leads to mischief with specific identity of each individual, is available.

Q: CII is actually recommending dual pricing of diesel; is that really practical?

Munjal: This is exactly the point I am making, now it is possible. When you have individual identity which you cannot change, especially if it's locked in with biometrics, then you can do these things and use these tools that's what these are for.

The earlier problem was the extreme leakage and almost mismanagement of some of these systems and the amount of money which was going in was actually certainly not reaching the target audience.

Q: Stick your neck out and tell me what you really think he is going to be able to deliver?

Munjal: I think he is going to focus on growth because the reality today is unless you get growth you are not going to generate revenue. As you said, unless you have additional revenue none of the schemes that we are talking about is going to be possible to implement. So he has to find a way to focus on growth, whether it's through additional investment allowance kind of schemes, whether it's extended depreciation, R&D being extended to all activities or a whole host of other activities which are possible to do which will create growth.

So we have to be able to give out funds to allow growth and the government is not giving this up, it's coming from the additional revenue which will get created and that then will allow us to run some of the social schemes in the manner that we would like them to see. At the same time, we are a bit wary because we don't want bits and pieces of things like DTC coming into this budget without all things comprehensively looked at. This is why we said DTC must come only if and when GST comes. We hope GST comes this year, if not with the budget, which seems unlikely, certainly by October of this year.