Indian Union Budget 2010: The Road to Fiscal Consolidation
NEW YORK, March 2, 2010 - After much anticipation, the Indian Union Budget was presented by Pranab Mukherjee, India's Finance Minister, on Friday, February 26, 2010. With the budget proposals in hand, panelists gathered to provide different insights and outlooks on the future of the Indian economy.
The budget outlined three goals for India's economy - reverting to high gross domestic product growth, inclusive development and institutional reforms. The budget proposals presented a hopeful outlook but whether these proposals will assist in achieving the intended goals will be put to test when the budget plans are implemented at the start of the fiscal year on April 1.
In the discussion, Arun Kumar, partner at KPMG's US-India practice, said that economic growth is very important in India. With the hype surrounding the Union Budget, Kumar quoted a friend who described the country as suffering from "budget mania." He said there are two ways to look at this. First, the close attention paid to the Union Budget is a healthy since it allows significant public discussion on a vital piece of legislation. Second, the budget should become a process than an event. So, instead of expecting a breakthrough change, it is important to focus on resource raising allocations and long term vision. In order to fulfill this economic growth, he quoted Mr. Mukherjee saying that the Union Budget has to "reflect the government's vision and signal policies to come in the future."
Then, Giresh Vanvari, Executive Director of KPMG Advisory Services Ltd., provided an overview of the Budget by pointing out key issues and prospects. He said there are several challenges that prevent growth in India including inflation, fiscal deficit and sectors that prevent Foreign Direct Investment (FDI). Nonetheless, Vanvari said the government will be able to focus on the theme of "growth" by simplifying and liberalizing the FDI and banking sector, focusing on infrastructure development and supporting special sectors such as agriculture, health, education and small scale industries.
While recognizing the uncertainties and downside of the current situation, Ajay Chhibber, Assistant Administrator and Director, Regional Bureau for Asia and the Pacific, UNDP, viewed the budget as a sensible means which charts a passage for growth and fiscal management. According to Chhibber, there are three critical contexts in which to view the budget: a huge demographic dividend; how India has managed the global crisis and how India deals with huge inequalities on both personal and regional levels. Despite these uncertainties and challenges, Chhibber has given high marks to the Budget.
Following Chhibber, Parag Saxena, CEO of New Silk Road Partners, expressed that the Union Budget is more than a proposal or a statement of accounts but rather a policy statement. He pointed out that the simplification of governance is what makes the economy grow faster and noted that education is critical. He concluded that this Budget is a stable budget for India.
In all, the panelists agreed that India can expect to be on the road to economic recovery. The key to achieving growth, however, will only be realistic when the challenges are tackled and inclusive growth is achieved through a tangible fiscal consolidation.
Reported by Anna Maria Lee