Budget Analysis: FM has shown real image of eco, sent right signals: Montek

In an interview to CNBC-TV18, Montek Singh Ahluwalia, deputy chairman of Planning Commission shared his reading for the Union Budget 2013.

Below is the verbatim transcript of his interview on CNBC-TV18 Q: The Budget has now been presented and according to the reactions, it is a lackluster Budget. It is a Budget that’s not glaringly populist in its initiatives, but it is not a game-changer of a Budget. Given the fiscal constraints, the political constraints do you believe that this is the best the finance minister (FM) could have done?
A: I am not sure what reactions you are sampling, but the Budget correctly addresses the central challenges before us, recognising what the big problems are.
One of the big problems at the moment is the macroeconomic stress. We have got a large fiscal deficit, and a large current account deficit (CAD) and the growth rate has slowed down. Also Read: Budget 2013: First women's bank in India
Therefore, it is essential that we take care of these macro imbalances and push onto the growth side and the FM has outlined what needs to be done.
Not all the action is technically, what is done in the Budget like the tax changes. The Budget is about macro balancing and there he is doing the right thing.
As far as tax changes are concerned, he has maintained the stability of tax rates. So, there isn't this notion that we are changing everything all of a sudden. He has put in a surcharge for very rich.
It is a one-year affair given that it is a difficult year, given that in many areas we may not be able to spend, that is the right signal to give. He also spoke about infrastructure and other things, necessary to get growth up. Q: There was a lot of talk, but there was not enough by way of actual measures to jump-start the economy or to jump-start growth and on the tax front he is assuming a 19 percent increase in tax revenue. Is that a tad too optimistic?
A: If you want to get into the details of whether the tax revenue increases are reasonable or not, you need a lot more time on this channel. But if growth this year is down to about 5 percent, then they are hoping that it is going to be a lot better next year.

The upper end of the economic survey range of about 6.7 percent is not unreasonable. This is because the economy's long-term growth rate by a 10 year average is somewhere around 7.2 percent. So, from a low point to get back up to 6.7 percent in the first year is quite possible. If you get that, then you will also get a lot of revenue buoyancy at the same time. The term jump-start also seems to anchor for some sort of magic solution.
The slowdown is not something which is going to be corrected by giving you a few little tax incentives here or jump-starting. We know that there are real supply side constraints. He mentioned infrastructure, the Cabinet Committee on Investments (CCI), it is operationalising those kind of things. He also spoke about a lot of financing needs. We need a flow of financing in investment, particularly, in infrastructure as it will get the growth back up.