Pawan Goenka, President of the Automotive and Farm Equipment Sectors at Mahindra & Mahindra feels that while Budget 2013 will be a tightrope walk for finance minister Palaniappan Chidambaram, if there was ever a need for a Big Bang Budget, this would be the year.
In a detailed interaction on pre-Budget expectations with Firstpost, Goenka said there were conflicting requirements which Chidambaram would need to keep in mind: the imminent general elections on the one hand and the need to give a big push to the economy on the other. “This is the last full budget before the elections and there will be pressure on him to make it populist. On the other hand, the economy needs a large push. So it will be a tightrope walk,” Goenka explained.
However, he said he was hopeful that the Budget would focus on growth and would not be populist, going by everything the finance minister had said in the run-up to Budget Day. Referring to the ‘tight red lines’ of keeping fiscal deficit at 5.3 percent for FY13 and 4.8 percent for the next fiscal, he said if the minister delivered on this, it would be very good for the economy. “I would be surprised if it isn’t a Big Bang Budget. If there ever was a run-up to a Big Bang Budget, it has been so this time.”
Goenka said personally, he was hopeful that Chidambaram would come up with concrete measures to kickstart the growth momentum. This, he said, could be the best way for the ruling coalition to return to power since it could then showcase the positive outcomes of the next 12 months.
Pointing out that the direct cash transfer scheme would be a great move if it was implemented well, he said it could ensure that the intended recipient of the subsidies got them and would also reduce the burden for the government. “He does not have to cut subsidies to a large extent,” Goenka said. “This could make a huge impact.”
He said most would be looking not for specific announcement on sectors, but two or three key signals which would demonstrate that the government meant business. The Goods and Services Tax (GST) was one key move which could make a big difference, he said. A clear roadmap on its implementation and a date for launching it would be a huge positive, he said, adding that there had been some moves forward on this of late. Another such signal would be the Direct Tax Code (DTC) which had being somewhat diluted. He said he was hoping the DTC would now be frozen and lead to some key tax reforms. The new Companies Law and its implementation was the third such big signal, he said.
On the auto sector, Goenka pointed out that the biggest concern was a possible diesel vehicle tax, which could have a serious impact on the one segment of the auto industry which was growing. However, with the government announcing that diesel prices would be increased every month, there was little rationale for a tax on diesel vehicles now, he said. The industry would be very happy if excise duty was brought down, but given the revenue constraints, Goenka said he did not see that happening.
However, he hoped something would be done for the commercial vehicles and heavy duty trucks segment which was suffering by way of a 35-40 percent de-growth in the first 10 months of the current fiscal.