No step to directly push growth: D K Joshi

P Chidambaram has walked the talk on fiscal consolidation. Normally the government Budget attempts to stimulate a slow economy by raising expenditure and cutting taxes. Both of these options are not available, given the need to reverse the fiscal excesses of the past few years. The Budget has kept a rein on expenditures in general and has allocated a modest Rs 10,000 crore for food subsidy.

While the gross domestic product growth assumption of 6.1-6.7 per cent for 2013-14 is realistic, the Budget has aggressively targeted a revenue growth of 23.4 per cent that could slip unless divestments and spectrum targets are pursued aggressively. It has taken steps to boost infrastructure, housing and private investments in the economy, which is the need of the hour. The Budget will not directly push growth in the short run. But a low fiscal deficit will have a positive spinoff via other channels.

It will motivate the Reserve Bank of India to cut interest rates and improve prospects of private consumption and investment. Some extra-budgetary steps to boost private sentiment since the middle of last year in conjunction with the measures announced in the Budget are positive for private sector investments.

D K Joshi
Chief Economist, CRISIL