So where does India stand at the end of P Chidambaram's vote-on-account budget speech? Certainly better than before, as the worst in terms of populist giveaways did not happen. But we are not any better placed than before.
Thankfully, we saw no special pyrotechnics from the Seemandhra crowd, beyond the general din. So Chidambaram has given us a shorter speech, with the usual playing to the gallery, some pandering to favoured votebanks, and some much-needed sops for beleaguered sectors.
But the most important point to make is simple: since there were no new taxes and only giveaways here and there, the next government will have to raise taxes sooner or later.
Here are the six main takeouts from Chidambaram's interim budget.
First, the fiscal deficit number of 4.6 percent is better than the red line of 4.8 percent that was promised, but it is unreal, since it involves rolling over Rs 35,000 crore of fuel subsidies to the next year. And there could be more such accounting surprises once we read the fineprint.
Second, real fiscal correction is far, far away, as the revenue deficit is still at 3.3 percent - same as in last year's budget. Next year, the revenue deficit will be 3 percent - not significantly lower. And Chidambaram does not have to live up to that. The correction thus happened in plan and capital spending - which are the parts that drive growth. In short, Chidambaram has eaten up the growth-inducing expenses, while sparing the wasteful ones like subsidies. Chidambaram pulled the same trick as last year - with plan spending for next year being the same as last year's target - which was missed by a mile.
Third, the excise cuts on capital goods - from 12 percent to 10 percent - and the cuts on bikes, cars and SUVs are needed, and thus will be applauded even in an election year. However, it is not clear if the revenue losses under these heads have probably not been fully accounted for. Since diesel prices have to continue rising to reduce oil subsidies next year, one has to see if the cuts will boost growth - or whether the auto majors will swallow the cuts to improve bottomlines.
Fourth, the subsidy bill of Rs 2,46,000 crore is likely to be another underestimate - for it is almost the same as this year, when Rs 35,000 crore has been rolled over. It is unlikely the food subsidy is going to be any lower when the food security bill kicks in only from the next financial year.
Fifth, the populist parts of the budget - like the announcement of one-rank-one-person for the army, or more money for the minorities and women - are likely to do less damage than the time-bombs like the Seventh Finance Commission - which has been announced earlier. The land acquisition issues and costs under the new Land Bill will continue to haunt the chances of a quick recovery for some time to come.
Sixth, Chidambaram harped on the need to cut interest rates in order to revive growth and claimed some inflation is unavoidable in a growing economy. It is unlikely that RBI Governor Raghuram Rajan is on the same page as him on this. Thus, the battle between North Block and Mint Street not only continues, but will spill over to the next government as well.
12.00 noon: The big numbers are fiscal deficit at 4.6 percent for 2013-14, with target of 4.1 percent next year. But revenue deficit is the same as in budget at 3.3 percent. So no real correction has been made on fiscal profligacy. The cuts came largely in plan expenditure. Revenue deficit target for next year (2014-15) is 3 percent -far smaller than in the fiscal deficit.
11.55am: Here comes the real taxes part. Capital goods excise duty down from 12 percent to 10 percent. Duties on bikes and small cars cut from 12 percent to 8 percent, large and large and medium cars from 27/24 percent to 24/20 percent, and SUVs from 30 percent to 24 percent.
11.53am: As speech nears its end, Chidambaram goes aggressive on opposition and says it is blocking improved taxation laws, especially the goods and services tax.
Chidu warns RBI that in a growing economy some inflation must be expected, and RBI must balance growth with inflation control. Says the government will aim for fiscal deficit target of 3 percent by 2016-17. But that's for his successor government to decide.
11.50am: The populism begins. Chidambaram announces one-rank-one-pension for army. But this was taken as a given after Rahul Gandhi weighed in on this.
But the big the real outlays are missing. Banks will get recap funds of Rs 11,200 crore - grossly inadequate when many public sector banks are sinking under bad loans. Especially when he is expecting banks to lend Rs 8 lakh crore to agriculture. United Bank of India is already on the brink, with gross NPAs exceeding 10 percent, and the RBI asking the bank not to lend further. LIC will probably be asked to chip in.
11.47 am: Chidambaram claims he will roll over only Rs 35,000 crore of fuel subsidies to next year, much lower than last year's rollover of Rs 45,000 crore. Small mercies. Total subsidy bill for next year - on food, fuel and fertiliser - shown only marginally up at Rs 2,46,397 crore, up from Rs 2,45,452 crore. This is the number to look at. This is where the underestimate will probably be. Food gets Rs 1,15,000 crore, fuel Rs 65,000 crore, and the rest goes to fertiliser. Will be a gross underestimate unless global petroleum prices crash.
Key point made: plan expenditure failed to be met last year. Last year's target is now next year's - Rs 5,55,322crore. This is the key to his meeting the fiscal deficit target: reduction in plan expenditure this year. And shifting this year's expenses to next year.
11.45am: I have kept my promises, says Chidu. Says Nirbhaya Fund launched and will get another Rs 1,000 crore. Promises Rs 1,000 crore next year, when he won't be around.National Skill Development Fund to get Rs 1,000 crore more.
Says he has kept his promise of unleashing the direct benefits transfer scheme - never mind if it has been kept in abeyance for LPG subsidies. But his Aapka paise, aapke haath has not lived up to its promise of total coverage by now.
But Chidambaram, who was earlier a roadblock to Aadhaar when he was home minister, now says he is fully committed to it.
11.40am: Chidu says: "I reject the charge of policy paralysis". This is true for last 18 months at least. Diesel prices being adjusted, railways fares being rationalised, sugar partly decontrolled. Takes pride in dumping "oppressive, colonial" land acquisition laws in 2013, passage of Food Bill, opening up of multi-brand retail, blah-blah.
If Chidu is exciting the faithfuls in the party with his loud defence of the UPA's record, Manmohan seems impassive. Continues to look like Madam Tussaud's wax model in his seat.
11.30am: Chidu talks of growth reviving. Says overall 2013-14 growth will be 4.9 percent, which means second half growth will be higher than 5 percent. But he forgets to mention that for first time in post-1991 history, we have had two years of sub-5 percent GDP growth.
Chidu is in that part of the speech where UPA will claim its rule was the best thing after sliced bread in terms of development. Power capacity up. National highways built. Rural roads, jaw-jaw.
11.25 am: Numbers, numbers. Chidu now in that part of his speech where he will talk of agriculture growth, exports, etc etc. It is best to head for the loo and order the coffee in this part of the speech, now that the key fiscal deficit number is out of the bag.
Chidu announces fiscal deficit at 4.6 percent - well below his red line of 4.8 percent. Current account deficit down to $45 billion. Says: "We shall not, we shall never do anything to damage the economy."
Ha! What about the economic slowdown? Was that an illusion?
As for the fiscal deficit numbers, the real number will be 1 percent higher - for Chidambaram has deftly shifted his expenditure for this year to the next government - over Rs 1,20,000 crore. (Read here)
11.20am: Speaker Meira Kumar appeals to "honourable members" to allow interim budget to be read out in the last few days of the 15th Lok Sabha. Chidambaram looks around for succour.
11.15am: False alarm. Seems Chidambaram is doing his speech even in the din. But the budget is already tabled, and so even if he does not compete his speech, it won't matter.
11.00am: Chidambaram speech yet to begin. Seems he has chickened out. His budget speech may be made only for Lok Sabha TV. But the budget has been tabled. Telangana din, however, has already begun inside Lok Sabha.
10.55am: Will this be only a vote-on-account, or a vote-for-UPA budget? Some things Chidambaram may say can be taken as given: he will blame the global slowdown for India's woes; he will try and talk about how growth under UPA has been highest ever; he will take credit for the fastest poverty reduction ever.
What he may not talk about is how we have seen jobless growth. If he talks about inflation, he will talk about the last three months of vegetable price fall, not the overall UPA record of double-digit inflation for years on end.
10.50am: In just a few minutes from now, we will be put out of our misery. Right now, God's in his heaven, the markets are marking time (Sensex up just 58 points) , the rupee is at Rs 62, the Aam Aadmi Party hasn't said anything about Ambani (yet), and the Seemandhra pepper sprayers are not in sight.
All clear for Chidu? When (and if?) the finance minister begins his speech, on past record, we can expect another quote from the Tamil Saint Tiruvalluvar.
In his last budget, Chidambaram had this stanza from the Tirukurral:
“Kalangathu Kanda Vinaikkan Thulangkathu Thookkang Kadinthu Seyal”
Translated, that means: Man should do steadfastly (and without slumbering) what his eyes see as right.
Assuming Chidambaram has been quoting from the Saint not just for poetic embellishment, but is a true follower of his wisdom, at the end of his speech we have to ask him: has he done what is right for the economy? However, he may excuse us in case his speech finds us slumbering.
Meanwhile, one last joke at his expense, this one adapted from Silicon India.
Chidambaram is reported as saying GDP will rise this year. Er, he meant GDP as in Gas, Diesel and Petrol, not gross domestic product.
10.40am: In about 20 minutes from now, Chidambaram will present what is, hopefully, his last budget. That is, if the house is allowed to run by Seemandhra partisans - what's left of them in the Lok Sabha after last week's 16 suspensions.
This budget is important for him, not for you and me. Reason: his reputation is at stake, not yours and mine. He has to dive into the fiscal muck his government created and still come up smelling of roses – or least, not smelling of muck. Our only job is to watch the fun and throw a few metaphorical eggs (or tomatoes, if you are a strict vegetarian) at the man if we don’t like what he says, and give the occasional thumbs-up if he comes up with something interesting.
The betting is that he will make a political speech that will be quickly forgotten after this session. Unless he surprises us all by making a few tax changes that we will benefit from. But right now there is no likelihood of that.
If you are a masochist and keen on reading all the heavy numbers associated with budget – fiscal deficit, plan spending, GDP stuff – here are our stories on these areas to immerse yourself in while we wait for Chidambaram to clear his throat and start talking.
This one asks if Chidambaram will put country before budget, and not play to the gallery. Short-answer: don’t bet on it.
Latha Venkatesh tells us why you should not take the Interim Budget lightly. Read it, but for now we will ignore her advice and have fun.
This one tells us the tricks finance ministers use to fudge their budget numbers. You should attempt to read this only on a full stomach. I have put in all the gobbledygook – with a simple coating of aam aadmi lingo.
This one tells us why Chidu is making a song-and-dance about the fiscal deficit. Clue: he does not want to look at the real numbers that shows him in bad light.
And this one tells us what to look for in Chidambaram’s budget - beyond the MPs who may be lurking near him with pepper sprays.
If your eyes are glazing over after all this bombardment of the real stuff on the budget, here is a refresher.
This joke features an anonymous thief. And this is how the super-short conversation goes.
Thief, waylaying a pedestrian: Come on, hand over your money
Pedestrian: Don’t you know, I am finance minister Chidambaram?
Thief: In that case, give me back my money
10.20am: We may get some fun after all. Suspended Andhra MP Lagadapati Rajagopal, he of the pepper-spray fame, has promised that Seemandhra ministers who are still in the cabinet will create a halla when Chidu gets up.
We don't know that for sure, but meanwhile let's anyway have some fun. For those who have wandered in by mistake, here is one Chidu jokes to amuse you while we wait for his speech. This one features not just Chidambaram, but other 2G zero-loss heroes Kapil Sibal and Digvijaya Singh. It comes with the fingerprints of India Against Corruption. Here goes.
Chidambaram, Sibal and Digvijaya are being flown in a helicopter to 2G land.
Sibal, with the milk of human kindness sloshing inside him, as PG Wodehouse would say, drops a Rs 100 note and says this will make at least one poor Indian vote for us.
Digvijaya drops two Rs 50 notes and says, this should make two Indian voters happy.
Not to be outdone, Chidambaram drops 100 Re 1 coins and says, “Look, 100 Indians will be happy with UPA.”
A bemused pilot then mutters under his breath: “I just have to throw all three of you and 120 crore Indians will be happy.”
10 am: Hi folks. Good morning.
You are obviously here because you didn’t find the cricket in New Zealand enthralling, or the antics of our politicians too entertaining.
Or you may have wandered in by mistake. You’ve probably come thinking you are going to read about the Union Budget for 2014-15, which P Chidambaram will be presenting at 11 am today.
Well, you’ve arrived five months too early if you came in for the budget. The real 2014-15 budget will happen only in July, after the next general elections throws up a new government. This is largely a vote-on-account, a budget meant to keep the government running for four more months till a new one is elected.
This budget is clearly not the budget. A vote-on-account, a.k.a. the Interim Budget, is largely meant to keep government accountants and economists busy, the credit rating agencies confused, journalists employed, and the markets engaged for one more day while the economy goes down the tube.
But if you are here to stay, it is worth having some fun while we wait for Chidambaram to take a sip from his glass and begin.
Updated Date: Feb 17, 2014 13:49:29 IST