Times are tough … surely! So much so that any non-negative is beginning to be seen as positive. By this approach, in not being overly populist in a pre-election year, the Union Budget 2013-14 is a positive.

But then, tough times are actually favourable for tough measures. By this approach, the Budget must surely go down as yet another missed opportunity.

And what is that missed opportunity? That having identified the problems correctly, the Government seems to have got its solutions wrong.

Back to square one

Make no mistake. The Finance Minister’s speech highlighted the problems accurately and articulately. To quote, “The link between policy and welfare can be expressed in a few words: opportunities, education, skills, jobs and incomes.” But the solution to this seems to be one word: Government.

So you have a whole array of Government programs and “sub-plans” to address these issues — from Pradhan Mantri Gram Sadak Yojana (I and II) to National Skill Development Corporation to Direct Benefit Transfers to Nirbhaya Fund (for women-oriented initiatives) and even an all-women bank.

But then, the Government seems to have forgotten the other part of the solution: entrepreneurs. And this was the key opportunity missed — to rekindle the spark of entrepreneurship which had earlier fuelled the economy to its heights of 8 per cent-plus growth between financial years 2004 and 2008.

Is India welcoming with open arms domestic as well as international entrepreneurs? What have we done to make India a preferred investment destination?

Incomplete cad solution

The external sector problem too has been well articulated.

To quote again from the Budget speech, “My greater worry is the current account deficit (CAD). The CAD continues to be high mainly because of our excessive dependence on oil imports, the high volume of coal imports, our passion for gold, and the slowdown in exports. This year, and perhaps next year too, we have to find over $75 billion to finance the CAD.”

But as in the first case, here too the proffered solution appears one-sided: “There are only three ways before us: FDI, FII or external commercial borrowing.”

The Minister seems to have missed both aggressive export promotion and active import substitution as the more structural and self-reliant solutions to CAD. There is nothing in the Budget which focuses on either or both of these.

The weakness in the rupee after the Budget may be taken as a sign that the forex market too remains concerned.

Even some of the revenue assumptions seem ambitious. Thus, the 2014 fiscal estimates seem to build in some ambitious targets such as divestment of over Rs 55,000 crore in public sector companies and telecom spectrum revenue of over Rs 20,000 crore.

(For example, divestment was Rs 24,000 crore v/s budgeted Rs 30,000 crore and spectrum revenue barely Rs 1,000 crore v/s budgeted Rs 40,000 crores in the last fiscal.)

To be fair to Chidambaram, he had made bold announcements preceding the Budget, and probably even bolder announcements are in store after the Budget, Mint Street included.

(The author is Joint Managing Director, Motilal Oswal Financial Services

Ltd.)

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