Comment: Kiran Mazumdar Shaw

A play-it-safe Budget with no bold reforms

Striving to augment growth in the face of rising inflation and falling investor confidence, India needed Finance Minister Pranab Mukherjee to deliver a 2G Union Budget — a bold statement from the UPA government that addressed Growth and Governance. Unfortunately, all he has is delivered is a ‘play-it-safe’ budget by balancing his books, containing the deficit, averting subsidies and creaking open the door to foreign investment in Indian mutual funds.

For a government that started its term with meaty pronouncements on the need for reform, this was an opportunity for the UPA government to take some long overdue and bold decisions in retail, insurance and infrastructure. It was a platform for the government to back up its pronouncements on growth and employment with bold budgetary rollouts in manufacturing and services. The Budget has made cosmetic pronouncements when it comes to clean energy and higher education, without offering these crucial sectors the means with which they can bring positive change.

The Indian Growth Story has been sustained by foreign direct investment, as investors across the world clamored to partake in the dividend offered by the country’s growth. Now, we seem to have lost the plot even as other emerging markets are managing to garner higher foreign investment, we are failing to compete and seem to have lost our policy momentum. The result? In the past 2 months alone, $2 billion dollars have been taken out of the stock market. In 2010, FDI reduced 30 per cent to $24 billion. These are very dangerous signs, reflecting a reality where investors are losing confidence and we cannot afford to be complacent. This budget needed to take steps to attract FDI back to India, especially in the retail and insurance sectors. However, apart from allowing FDI in MFs, Mr Mukherjee has failed to take any step towards this end.

Beyond growth, India’s sizeable population of youth requires jobs, which cannot be created by the government. The government can only enable jobs by setting a job-oriented tone for sectors that create jobs, such as retail and manufacturing, which are again largely absent in this Budget. While the finance minister is promising that the government will come out with a manufacturing policy, which is a welcome sign, we don’t know what it entails.

Kiran Mazumdar Shaw
CMD, Biocon