A workmanlike Budget: Rajiv Kumar

Introduction of 15% additional investment allowance for next two years will strengthen investment flows

Caught between a declining economic growth rate and an upcoming Budget, the finance minister (FM) was in an unenviable spot. But given his reputation, Chidambaram had raised the expectation that 'when the going gets tough, the tough get going!' He almost lived up to this expectation by ostensibly living up to his promise of containing the fiscal deficit to less than 5.3 per cent and bringing it down to 4.8 per cent in 2013-14.

But the numbers show to achieve this, he expects the subsidy bill to decline from Rs 2,57,654 crore in the revised estimate for 2012-13 to Rs 2,31,084 crore or a reduction of more than 10 per cent in the total amount. This would be challenging, given that he has allocated only an additional Rs 10,000 crore for financing the food security Bill.

The other two priorities for the FM were to raise the investment rate and bring the current account deficit to less than three per cent of the gross domestic product. The introduction of an additional investment allowance of 15 per cent for the next two years will, hopefully, strengthen investment flows. But these could be offset by the imposition of a surcharge of 10 per cent on corporate incomes. I was hoping for him to announce measures to reinforce the investment sentiment. One does not find any real measure to curb the current account deficit. Overall, a workmanlike Budget, which might not overly enthuse investors but will not cause extreme disappointment either.

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Rajiv Kumar
Senior independent economist and former secretary general, Ficci