Budget Reactions: Need GDP of 6.5-7% to boost fisc deficit target: Naina Lal

Naina Lal Kidwai, President of FICCI told CNBC-TV18, the Budget has covered as much as it could in terms of reviving the investment cycle. According to her, if all the projects that are stuck are brought on track, it is capable of adding 1 percent to the country's gross domestic product (GDP). Therefore, a lot of things actually lie outside the purview of the Budget and it needs to be addressed adequately. 

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Besides, Kidwai also believes that the finance minister will be successful in achieving the fiscal deficit target of 4.8 percent. "My concern is and I do believe that the fiscal deficit number of 4.8 percent will be achieved because we have a Finance Minister who is extremely conscious on the risks of not achieving it and he has left a very large part of the expenditure and planned budgetary spend for it," she noted. Kidwai further mentioned that in order to achieve the fiscal deficit target, growth of around 6.5 to 7 percent will be required in FY14. Here is the edited transcript of the interview on CNBC-TV18. Q: Let us pick up on the point of restarting the investment cycle and there has been the investment allowance that has been brought back up several years, there have been more measures that have been announced, especially as far as the infrastructure sector is concerned, something on housing as well. But, is it really enough to generate confidence to actually get the investment cycle kicking again? A: As much as could go into a Budget, it is there. A lot of the problems on the investment cycle actually lie outside of the Budget. Delivery for example on the CCI, which got mentioned and the cabinet committee of investments is going to decide on projects that are stuck. FICCI studies are actually indicating that we could add 1 percent back into the gross domestic product (GDP) just by making sure that these projects moved out of the zone of being stuck. So, imagine if we could just get them moving very quickly, unlock the money that is stuck in there, it doesn’t need more funding and we just need to move ahead. I hear that in the last two meetings of the CCI, which are not enough, but in those two meetings they managed to clear at least some of the projects going forward. We have to ensure that the deliverables on growth, in terms of the investment environment outside of the Budget pickup from where the Budget lets off and the Budget does touch on these which are important. My concern is and I do believe that the fiscal deficit number of 4.8 percent will be achieved because we have a Finance Minister who is extremely conscious on the risks of not achieving it and he has left a very large part of the expenditure and planned budgetary spend for it. Maybe he will have some leeway to scale back if things are not going according to plan. So, in one way and that is almost good. He opened by talking about the growth being critical and growth is what leads to the march of the nation forward. It is quite important that he has raised the level of that vision to one which is comprehensive and does not talk of growth versus poverty alleviation and separate the two. In that comes a very strong message to the industry about growth as well. Q: What are you now working with in terms of a full year FY14 GDP number? A: What is slightly worrying is that the revenue side has spectrum or the telecom proceeds of about Rs 40,000 crore and it looks aggressive. A disinvestment number of Rs 58,800 crore, which I believe is achievable as long as markets stay buoyant. The whole area therein, of what we need to really look into is the tax revenue that comes from growth which is about 19-20 percent. If you back into that number, it would actually need a GDP growth of more like 6.5 to 7 percent. In order to achieve the fisc at the level that we need, what we absolutely have to do is to ensure that we can get a growth which is north of 6.1 percent and more like 6.5 to 7 percent. I think that is going to be a key driver which we are going to have to get to and we need the private sector, we need industry, we need agriculture, we need service sector and we need the government all pumping to that number.