Unpleasant surprises over, Budget 2013 may please capital mkts: Ficci

If you think high gold imports are the reason for the soaring current account deficit (CAD), think again.

If you were to ask Soumya Kanti Ghosh, Chief Economist at Ficci, the apex industry chamber, gold imports were already falling fast when the government was proposing raising import duties.

He says the real culprits are rising oil imports and the 6 percent drop in exports this year, which have worsened the CAD, he told Firstpost in an exclusive pre-budget interview.  He also believes that the finance minister should be able to achieve the fiscal deficit target of 5.3 percent this year through judicious revenue maximisation and expenditure minimisation.

Ghosh says that taxing the rich more will only hurt the investment climate in India. Pointing out that the rich (those earning more than Rs 20 lakh annually) already account for two-thirds of total direct tax payments, he says that taxing them more may not generate additional benefits.

On the expenditure side, Ghosh expects the Food Security Bill to be announced in this budget but seems optimistic about meeting the fiscal deficit target since the government has already cut subsidies such as for diesel. So the budget this time could well be an election year exercise, but then the government has already administered the bitter pills earlier.

Ghosh says though the Food Security Bill may come in the budget, there seems to be no scope for a farm loan waiver. Also, some other sops such as a reduction in the securities transaction tax (STT) or the capital gains tax could be announced to please the capital markets. The government has already postponed the implementation of the General Anti Avoidance Rules and finished unpleasant announcements like diesel and railway fare hikes.

So perhaps, the budget may not bring many unforeseen or unpleasant surprises.