Budget 2013 will be a test of sorts for Finance Minister P Chidambaram. The last budget he presented in 2008 was a dream Budget against all positive signals in the economy. But this time it is the exact opposite but with all macro indicators, be it fiscal deficit, inflation, current account deficit and the rupee, running against the economy.
Moreover, the markets are already disappointed and have been consolidating over the last two weeks.
"Judge me by this budget", is what Chidambaram told foreign investors during his global roadshow. In terms of foreign investors expectation, they have already got their Santa Claus gift from the Finance Minister in terms of the GAAR deferral. What they will look out for now is any slippages on key macro numbers, says Firstpost editor Venky Vembu.
Financial Express managing editor M Venu, however feels that the government will surprise everybody on the upside by actually keeping expenditure on leash. " Already ministries are complaining about expenditure cuts,which this time will be drastic because the budget for centrally-sponsored schemes have gone up 25 times in the last couple of years," he says.
He feels that Budget 2013-2014 will be strong on expenditure control.
Market expert and columnist Arjun Parthasarathy however believes that markets are already positioned for a good budget. Equities are seeing good flows from FIIs and a responsible budget will even see more money coming in from them.
There is already a change in sentiment regarding a fiscal correction exercise among investors. But the biggest worry for the finance minister is not fiscal deficit but capital flows to bridge the current account deficit.
Meanwhile, writer and columnist Vivek Kaul says more than expenditure, it is the income of the government that is worrying. " While expenditure has gone up 300 percent since 2006, income has only gone up 33 percent. The government is clearly spending more than what it is earning." The finance minister needs newer ways to increase tax collection, which is yet to happen.
So while he has committed himself to subsidy reforms, it will invoke inflation and result in policy conflict.
Watch the debate on whether Chidamabram has any room to present another Dream Budget below: