If the end result is an economic symphony that increases the tempo towards a double-digit growth finale and sounds melodious to all constituencies, Finance Minister Pranab Mukherjee’s Budget 2010 is a brave statement of intent whose benefits — if the various instruments and their players perform in tune — will accrue over the next few years. Hopefully, irreversibly.
I see seven players, currently solo artists performing to fragmented audiences, who Budget 2010 has attempted to bind into a single symphony. The results, if successful, will be unforeseen productivity gains for the economy. But as with the results, the challenges of turning a cacophony into a wider and deeper symphony that Mukherjee has in his mind are steep. Here are the seven instruments and the players behind who can make or mar his performance.
Fiscal roadmap. With Thirteenth Finance Commission (TFC) recommendations accepted, Mukherjee has projected India’s fiscal deficit to fall to 5.5 per cent this year and to 4.1 in 2012-13. The roadmap to this fall lies in TFC in which its Chairman Vijay Kelkar has argued for a calibrated
withdrawal of tax sops announced in the past two years. The opposition here will not be at the Centre, but at the states level.
Goods and services tax (GST). “We are actively engaged with the Empowered Committee (of state ministers on GST) to finalise the structure of GST as well as the modalities of its expeditious implementation,” Mukherjee said. The man to watch in this case is the Committee Chairman Asim Dasgupta — how he manages to get states on board will depend on whether Mukherjee is able to introduce GST in April 2011. The benefits: approximately $500 billion over the next 10 years or an addition to GDP growth by 1 percentage point per annum.
Disinvestment. While the Congress party has given it the go-ahead, not all the UPA allies are in tune. The DMK, for instance, will oppose the disinvestment of Neyveli Lignite Corporation. While the strategic decisions will be fine tuned in 10 Janpath, the execution of raising Rs 40,000 crore by selling PSUs will come from New Delhi’s CGO Complex where Disinvestment Secretary Sumit Bose sits.
Direct tax code (DTC). “On the DTC the wide-ranging discussions with stakeholders have been concluded,” Mukherjee said. “I am confident that the Government will be in a position to implement the Direct Tax Code from April 1, 2011.”
One question: if things are so smooth, why has the DTC Bill not been listed in this Budget session? While I don’t get it, action on this front will happen at Mukherjee’s colleague Minister of Corporate Affairs Salman Khursheed’s office at Shastri Bhawan.
Unique Identification Authority (UID) of India. In the third leg of Budget 2010, Mukherjee addressed the weaknesses in governance systems and public delivery mechanisms. Taking off from his previous Budget speech, Mukherjee has allocated Rs 1,900 crore for UID such that the first set of numbers to help provide “financial inclusion” and targeted subsidies would be out this year. The man in charge: Nandan Nilekani, who told me the money is adequate.
Financial Stability and Development Council (FSDC). This institution would have been redundant, or at best a sinecure for retired bureaucrats, had the four financial regulators — RBI, SEBI, Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority — had worked in harmony. Unfortunately, from the consumer’s point of view, IRDA under various heads including the incumbent J. Hari Narayan, has morphed into an industry association and has done nothing to stop mis-selling in the sector. I hope FSDC fixes this and other inter-regulatory coordination issues, something the High Level Coordination Committee on Financial Markets has repeatedly failed to do.
Politics. Apart from 7 Race Course Road and 10 Janpath, where Prime Minister Manmohan Singh and UPA Chairperson Sonia Gandhi live, the political assent to burning issues such as fuel price hike one being opposed by his colleagues — Railway Minister and head of Trinamool Congress Mamata Banerjee from West Bengal and by Tamil Nadu Chief Minister and head of DMK M. Karunanidhi. Both have written to Singh and Gandhi to urge Mukherjee to roll back the hike. Good bye, Kirit Parekh report?
The biggest challenge to Mukherjee, therefore, is to bring these discordant notes together to help him conduct his symphony from North Block. Will he be able to?