Is this a make or break budget for India?

Can Budget 2012 prompt real change? Is India missing out on the opportunity to cash in on higher fund flows at a time when the west is suffering from a crisis? All eyes are now on the FM's brown briefcase to pull a real surprise for the economy during Budget 2012. There is immense hope that the FM will help turnaround the tepid sentiment in the country. But will Pranab Mukherjee deliver a strong hard hitting budget for a nation in need or will his diplomatic ways succumb to the political pressure? 

ET NOW's Shaili Chopra speaks to top honchos from India Inc in a special pre-Budget show 'Budget for renewal' only on ET NOW. An invigorating discussion on whether Budget 2012 would incentivise investments and offer new policies on tax, subsidies and growth renewal.

The elite panel comprises Arun Nanda, chairman of Mahindra Holidays & Resorts; Vikram Singh Mehta, chairman of Shell Group India; Mohandas Pai, director of Manipal Universal Learning and Pramod Bhasin, vice-chairman of Genpact.

Is this likely to be a tick-mark budget and not a game-changing one. Do you agree?

Arun Nanda: I think it's unlikely that this budget will be a radical one. It's going to be populist one.

If there was one big idea you'd like seen addressed this budget, what would you pick?

Arun Nanda: I think we should get some disinvestment out there and cut down the deficit. We need to create more resources and bring around availability of money.

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So will the budget then address subsidies to free up resources?

Vikram Mehta: I am hoping the government does something tangible on subsidies for petroleum products.

One of the items in the budget I hope will be to reduce the subsidies for kerosene and replace it with distribution of solar lanterns and cookers. If we don't disconnect our subsidies from pricing, we will not be able to manage our fiscal deficit.

How could the FM deliver on raising tax collections?

Mohandas Pai: I think fisc management is key for the FM. Revenues are not rising while expenditures are going up. Borrowings are too high and hurting the economy.

The FM must try to cut spending and not borrow any further. He should consider not increasing tax rate but on improving tax collections.

Arun Nanda: I agree with Mohan that we should keep tax rates stable. In fact we can still be more liberal with double taxation of dividends. But what I don't know is whether a budget one year before elections will cut down subsidies as it may end up hurting the common person.

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We have been talking of a direct tax code and GST for sometime, could the government speed this up to change the sentiment in the economy? At the moment there is buzz that it may only get addressed next year with a small transition plan.

 Vikram Mehta: There is an urgent need to do something about GST. We are hoping the government will garner political will to take that forward. Govt must take the tax base up and move to the population beyond just those with pan cards right now.

Clearly at this juncture, one of the key requirements for the economy is to find a way to give a budget that will reverse the mood in the economy. Today the sentiment is down beat and so the FM needs to tackle a few reform initiatives. 

If there is one reform you can bet on from the FM's budget 2012, would simplification of taxes be a step forward?

PramodBhasin: The biggest reform we need is on taxation. Now I don't think all will go through but I just think the govt and the opposition that all of them will get the green signal.

But these are important for India and they will make doing business in India a lot easier. Even if we bring some simplification and take some steps partially there, it will eventually be a major move for us.

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One lakh crore is the budget estimate on fertilizer, food and fuel subsidy. The government hasn't even managed to get close to the Rs 40,000 cr divestment target in FY2012, are we even going to be able to achieve this next fiscal?

Vikram Mehta: Divestment should go beyond dilution of shares. Government organisations should look at getting strategic partners as well.

Is the govt doing enough to get more out of its PSUs?

Mohandas Pai: I would expect that the FM will clear divestment in some form. I would hope the FM will ask the PSUs to pay more dividends to the govt.

PSUs have about two and a half lakh crore of cash and I find it very funny that these companies are accumulating so much cash without paying dividends to the government. 

Sector wise, is real estate and affordable infrastructure likely to get any attention from the FM?

Arun Nanda: I do hope the FM will create incentives for the common man who can then buy affordable housing. I also hope the government considers a better tax credit or a big infra fund that can create a way for retail money for infrastructure.

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Will the FM pay attention to food security for people of the country. We may grow at impressive figures of over 7% but we continue to be nation where many don't manage enough food or quality of life.

Mohandas Pai: I expect the FM to fund food security more than subsidies on fuel. It may cost Rs 30,000 crore for food security but why can't the FM cut subsidies elsewhere. He can say let's reduce fuel and kerosene subsidies, lower taxes and increase the price of the items. We need to ensure the country's people have enough to eat.

The food security bill is the poster bill of the UPA, do you think it will get the budget's attention?

Arun Nanda: I feel, instead of spoon feeding people, lets find ways to create jobs. If you give something like this bill then it is going to be hard to ever take it back.

NREGA experience has not been good even though it was a well meaning initiative. Now people who were coming to work as unskilled labour now get Rs 100 sitting at home and on top of that you give him a kilo of rice then what could happen?

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