If they do not follow good economics, inflation will flare up, growth will stagnate, and when the general election comes, it will not be good politics." These wise words came from Kaushik Basu, Chief Economic Advisor to the Ministry of Finance, during a session at the India Today Conclave titled "Budget 2012 Report Card" . Formulating good economic policies is in the political interest of the Congress-led United Progressive Alliance government, the economics professor concluded.
But few of the panellists believed Finance Minister Pranab Mukherjee had given economics precedence over politics in his Budget. Kicking off the session, Bharatiya Janata Party (BJP) leader Arun Jaitley termed the decision to cap subsidies at two per cent of GDP unrealistic. In the last Budget, the subsidy bill actually overshot the target by nearly Rs 73,000 crore.
Formulating good economic policies is in the political interest of the UPA government"
Rahul Bajaj, Chairman of the Bajaj Group, questioned the projected 'Budget figures', especially the gross domestic product (GDP) growth rate of 7.6 per cent and the fiscal deficit ceiling of 5.1 per cent for 2012/13. "One worries whether the numbers are achievable," said Bajaj. His scepticism is justified as GDP will fall well short of the nine per cent target to settle at around 6.9 per cent in 2011/12. The fiscal deficit widened from the targeted 4.6 per cent to close to six per cent during the same period.
Malvinder Singh, Executive Chairman of Fortis Healthcare, was the lone voice giving Mukherjee the benefit of doubt. Singh, who sold family jewel Ranbaxy, giving a fillip to his interests in health care and financial services, pointed to the difficult global environment as well as the political uncertainty and economic situation at home. "The Finance Minister is following a systematic approach of inclusive and sustainable growth," he said.
Adi Godrej, Chairman of the Godrej Group, noted that the goods and services tax (GST) had been languishing for the last three years. "That alone would have contributed 1.5 to two per cent to our GDP," he said. Basu felt it was still possible for the economy to achieve nine per cent growth in the next two to three years. If that happens, the UPA government will be able to dismiss the charge of being overly optimistic about Budget numbers.