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Budget 2012: Mamata shocks India Inc

Last updated on: March 16, 2012 09:29 IST

Budget 2012: Mamata shocks India Inc

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Arijit Barman

Mamata Banerjee's populist track may derail a lot more than just a Cabinet minister or even a Railway Budget.

India Inc says the "theatre of the absurd" in the political capital has put at stake a lot more.

What is worrying most across corporate India is the government's lack of credibility, as the crisis of confidence has reached a nadir.

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Union Budget 2012-13: Complete coverage

Image: Mamata Banerjee.


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"We are taking one step forward, two steps back. Just when the mood was slowly improving comes this political drama over the rail Budget. It's been quite shocking. The allies cannot hold everything to ransom. If we don't do something radical now, we can well be a laughing stock," warns Harsh Mariwala, CMD, Marico Industries.

"The crisis of confidence is a very big worrying factor today," says CII president and senior Tata Group executive B Muthuraman. The problem is that there is no stability in policies. What's more worrisome is "policies are getting retracted midway like in telecom," he says.

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Union Budget 2012-13: Complete coverage

Image: Harsh Mariwala, CMD, Marico Industries.


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Harsh Goenka, chairman, RPG Enterprises, shares the anguish. "We are seeing the nadir of politics. I still hope this is a temporary phenomenon. But, what is happening after the pragmatic rail Budget is shocking. The management of the country cannot be derailed like this. These are trappings of a fractured polity," he points out.

Others said the government was just unable to speak in one voice. "Unless the different actors speak the same language, how can you have cohesive policy decisions?" asks Anil Singhvi, chairman, ICAN Investments.

Singhvi goes on to explain. "From RBI to Planning Commission to Economic Survey to the minister himself, all are giving different growth projections. Which one should you trust? Would it have happened in the US?"

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Union Budget 2012-13: Complete coverage

Image: Harsh Goenka, chairman, RPG Enterprises.


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India Inc is, thus, desperately hoping the finance minister will walk the talk tomorrow. It is clearly looking at a big-bang Budget.

Corporate investments have been slowing quarter after quarter since 2008. And, as JPMorgan's chief India economist Jahangir Aziz puts it, what started out as a cyclical slowdown has now become much more structural.

Money is getting sucked out for consumption and not for capital formation or investments. In such a backdrop, "a bold Budget can revive sentiments," says Mariwala before adding, "hopefully, one that will be supported by all the allies and won't get rolled back." 

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Image: Finance Minister Pranab Mukherjee.


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With RBI maintaining a status quo on rates and talk of excise and service tax going up to the pre-Lehman Brothers crisis stage of 2008, captains of India Inc complain they are "caught between the devil and the deep sea".

Beyond tax rate hikes, the FM should tap the other levers available, feels Muthuraman. His prescription: Improve the efficiency of social sector schemes, control subsidies, kick-start public sector disinvestment or even privatisation in some cases.

"You can also widen the tax net without hiking tax rates or improve the efficiency of revenue collection," he adds.

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Image: RBI.


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The same goes for other pending reforms. "The Companies Bill, FDI in retail, tax reforms like GST all need to be taken out of hibernation," Mariwala outlines his priorities.

But, there are quite a few, including Kishore Biyani, the Future Group CEO, not expecting much from the Budget. It's hard to say if that's why Biyani - a regular for post-Budget interviews in the last few years - is flying to Singapore tonight.

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Union Budget 2012-13: Complete coverage

Image: Kishore Biyani.


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In any case, the much sought-after headline reform move, FDI in retail, is not going to be a part of the Budget. But, the poster boy of the consumption story may well have the last word.

"Everybody has reconciled that nothing much will happen. The FM will try to keep everybody happy, as it's all about a balancing act these days."


Union Budget 2012-13: Complete coverage



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