The wicket was firm, some dry grass on it along with a few cracks.

The
excitement is just building up. The countdown clock takes rest as the
mega event takes the center stage. The teams are walking out to the
middle ... well the match to be played sure does arouse the same
excitement as the opening match in the world cup but it comes a twist, we
have on one side a 1.1 billion player team and on the other a one man
army! And on this bright, sunny morning, Pranab Da bowled a googly!
When the world was glued to the television, he came out not with a
populist, not with a reformist but a fortunist budget!

The finance minister has decided to put his brave foot forward, he has
decided to leave it to fortune and mind you not measures to decide how
we shall hit upon the 9% growth rate.

Good afternoon, I am going against the motion, “Will the Union budget
2011-2012 help achieve 9% growth?”

9% growth rate, i tried seeing it from all angles, quite literally. It appeared
as a six to me in one. Truth to be told it did not convince me from any
angle that we could ever achieve it with our present union budget.

Well the Finance Minister got away with a budget that is laced with what
will likely prove to be overly rosy expectations.

Sorry to crash the rosy picture but the key assumptions that are expected
to lead us to this growth can be torn apart by plain old simple common
sense.

The growth rate is expected to be achieved supported strongly by our

back bone sector, the agricultural sector which gave us the 8.9 percent
growth in the previous quarter. This was largely due to an exceptional
monsoon season rather than increased productivity brought about by far-
sighted government policies. Well here we go again to believe in fortune
and luck.

Another key sector that is expected to contribute to the growth, the

industrial sector witnessed a sharp decline at the end of last year, foreign
direct investment fell 31 percent in 2010, and foreign institutional
investors have pulled out $1.2 billion from portfolio markets since January.
This does not portray a positive picture from any angle.

The overall inflation rate – clocked at an annual rate of 8.2 percent in

January – is unlikely to moderate in the coming months as the government
expects, especially given global trends toward higher food prices and
rising fuel costs. If the oil crisis arising from the Libyan political crisis is not
going to help our cause for sure. India possesses the highest inflation rate
among Asia’s ten largest economies. With this figure it is high time we all
pray to almighty to appear and help our country get the 9% growth rate.

Now the icing on the cake – fiscal consolidation – The FM's claim of fiscal
consolidation is outrageous! Tax to GDP ratio improvement is fiscal
consolidation. That ratio is down to 9.94 per cent or the lowest level since
2004-05 when it was 11 per cent. Even Latin American banana republics
and Botswana have better ratios than ours. So this fiscal consolidation
claim is absolute hog wash. Onion Republic is probably the better fit!

Any country that is on a growth path will be striving to reduce its fiscal
deficit. For this we need to increase our revenue and drop our
expenditures. Last year, government earned sizeable one-time revenues
from sale of premium 3G airwaves to the extent of around Rs. 1.1 lakh
crore and large disinvestment proceeds from stake sale of PSU
companies. If this is taken out, the fiscal fudge comes out. Asset stripping
is no fiscal adjustment, which is what spectrum sellout was. Only Raja,
Radia and some crooked journalists and bureaucrats appear to have
benefited from such fiscal fudges.
The magic wand should then be lowering of expenditure. Pranab babu
wants to restrict expenditure growth in 2011-12 to a mere 3.3 per cent
above the revised estimate of 2010-11.Is that credible?

I think not, for three reasons. First, it will be the second slowest
expenditure growth in budget making over the past 45 years and,
therefore, might be doomed per se. Second, we are now getting into
election mode in various states, and I expect demands for arbitrary
increases in social sector expenditure which would be difficult to resist,
especially if these were to come from the High Command. Third, all we
need is oil prices to rule at around $115 per barrel for a quarter. Like that
is ever going to happen!

The amount of fiscal deficit has actually gone up by Rs.20,000 crore. How
then could the percentage of fiscal deficit come down? It defies the logic
of numbers. Yet, none of the commentators in awe of his miracle have
asked Mr. Mukherjee how he achieved the miracle. It is not his feat.
Runaway inflation did the trick, not the Finance Minister. Surprised? Hear
on and you shall be surprised! The higher nominal growth in GDP is just
because of hyperinflation which has helped reducing the fiscal deficit
figure! It is just a painted figure to portray a false rosy picture. The
Medium Term Fiscal Policy Statement annexed to the budget obliquely
admits this fact. These are lessons that most advanced economies have
learned through experience; in the U.S., you only need to go back about
30 years to find a prolonged period of high inflation, which was only
remedied by going through a painful period of high unemployment and
lost production as potential capacity sat idle. I hope we don’t get to see
those days.

The Finance Minister could not have trivialised the issue of black money
abroad more. In his budget speech, he has just repeated what he told the
media on January 25, 2011. He has pontificated on corruption. His written
brief on the implementation of programmes he had announced in the
previous budget shows that out of 66 programmes, only 25 have been
completed, many of them paper work. Without getting out of corruption it
seems impossible for our country to achieve this growth rate, but we don’t
seem to be in any hurry to curb corruption. Perhaps we are waiting for yet
another swish of luck from the magic wand.

The budget proposal is devoid of reforms targeting the structural

impediments throttling India’s full economic potential. The budget
presentation would have been an opportune moment to unveil a plan to
liberalize the retail sector, but that was not to be. Missing, too, was a
commitment to open the insurance sector to overseas investment, a
reform that many have long acknowledged as necessary. With the lack of
such measures, if we still manage to bag the 9% then well Mr.Pranab is
definitely our lucky charm.

A day after the budget’s presentation, these shortcomings were decried in

a hard-hitting address by Mukesh Ambani, chairman of Reliance Industries
and the country’s richest man. Speaking at the annual meeting of the
Federation of Indian Chambers of Commerce & Industry, he rebuked the
small-bore reform agenda pursued by Singh’s government. Well if the
budget could make the usually reticent Ambani say it so many words, it
makes believe that 9% growth is far from achievable for our country in the
present scenario.

Morgan Stanley lowered its growth forecast for India’s GDP in the fiscal
year starting April to 7.7%. Pick-up in private corporate capital
expenditure has been gradual due to concerns over global growth, higher
inflation, corruption-related investigations and a rise in the cost of capital,
Morgan Stanley said. Morgan Stanley seems to have nailed it on the head,
something that seems to have missed the heads of our esteemed
politicians.
Well it is said that the Finance Minister has gotten third time lucky to be
giving the budget speech in a hatrick. The allocation of 300 crores to
many sectors is supposedly an extension of the belief that 3 is our Finance
Minister’s lucky charm. His fairy godmother seems to have answered his
calls. Is it this belief in good fortune that has made him come up with a
number that is multiple of 3 as an estimate for the growth of our country?
Well I hope to think not, but am forced to think yes as there is nothing in
that 33 page booklet that makes me convinced that we will hit the target!