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| The view from b-schools |
| BS Reporter / Feb 27, 2010, 01:52 IST |
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Reform expectations not belied; Rating 6/10
Deepak Srikumar
Post-graduate programme, Indian School of Business
Students at the Hyderabad-based Indian School of Business (ISB) are happy that the government has not belied expectations of a “reform-oriented” Budget. With the Indian economy showing clear signs of recovery after last year’s financial crisis and no major elections this year, except in Bihar, the 2010 Union Budget presented a unique opportunity to India’s financial policymakers.
And Finance Minister Pranab Mukherjee certainly made a positive impact, according to students who were asked for their opinion on this subject. Some students like Somesh Satnalika, however, believe that much more could have been done in a non-election year. “While the Budget is certainly a move in the positive direction, meaningful long-term reforms in sectors such as education and agriculture are not part of this Budget,” says Satnalika.
Nevertheless, the reasons for the sharp market reaction, believe most students, could be the clarity on the roadmap to fiscal control, reduction in personal tax levels, continued commitment to simplify the tax framework and sops to key sectors such as infrastructure and agriculture.
Meanwhile, the students polled here are happy that the 2010 Budget addressed the issue of a large fiscal deficit and also laid out plans for rollout of the Goods and Services Tax and the Direct Tax Code by April 2011, thus sending out a positive signal on the government’s commitment to simplify the tax framework. On a scale of 1 to 10, ISB has rated the Budget at 6.
FM could have been firm; Rating 7.6/10
Sameer Narang
First year student, IIM-Calcutta
To gauge how emerging business leaders see the Budget, the Indian Institute of Management-Calcutta (IIM-C) conducted a poll of 87 students, asking them to rate the Budget on a scale of 1 to 10. The average was 7.6.
The students felt the government could have dealt with the deficit for 2009-10, which stood at 6.9 per cent of GDP, with a firmer hand. They fear a downgrade by rating agencies on this parameter could significantly increase India’s borrowing costs and certainly strain the country’s forex reserves. However, the finance minister has chosen to reduce the fiscal deficit in a slow, phased manner, and problems could arise if the world enters another recessionary phase or if we fail to contain our expenditures.
Students also felt that following the Kirit Parikh panel’s recommendations on freeing prices of petrol and diesel, a direct price hike was expected in some form – either a fixed hike or a hike linked to global crude prices. However, the finance minister chose to increase Customs External Tariff, which will adversely affect oil companies. They felt the Budget delivers well on the infrastructure front. They were also pleased with the “right combination of changes in direct and indirect taxes”.
There was a shade of disappointment, though, with the “gradual disinvestment process”, since there were “no concrete targets”. The students also felt exports received some unanticipated but much-needed support.
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