Finance Minister P. Chidambaram's formidable reputation lies in tatters after he presented the Union Budget, according to an economist.
It is so unlike of him, is how Pulapre Balakrishnan put it, while participating in the Budget 2013 analysis event here.
The growth-inflation-current account deficit seems to have overwhelmed him, Balakrishnan, who is also Director of think-tank Centre for Development Studies, said.
It will be instructive to recall even in 1991, the current account deficit (CAD) was around three per cent.
“But this year, we have already come across a figure of 5.4 per cent during the last quarter,” he said.
High growth between 2003 and 2008 is attributed to faster growth in agriculture and public investment, which was at a level not seen anytime in the past.
‘Crowding in’ was what characterised growth during that period.
“But now, investment is not being converted into growth due to lack of infrastructure,” Balakrishnan pointed out.
WAY FORWARD
Contracting imports and exporting your way out of the crisis is the way forward. But the Budget doesn’t offer any policy prescription to pursue this.
Public investment is the key to arresting a slowing growth, but there is little to promote this other than a token effort.
Proposed capital expenditure would not amount to anything given the inflation level, Balakrishnan said.
Foreign direct investment is a good policy option but there are not big amounts involved here.
It is another thing that FDI flows towards dynamic economies with dynamic policy environment, of which we are not one.
Financial incentives to private sector may sound good, but it is not a good policy to ‘outsource investment entirely to the private sector’.
“This is because there are specific products and services which the public sector are in best position to provide,” Balakrishnan said.