'If you look at this Budget, except for the Rs 2 increase in petrol and diesel, there is no positive or negative impact from the Budget for the common man.'
"There is no confidence in investment and investment is a function of confidence. Unless that is restored, the virtuous cycle of investment, more consumption, exports will not happen," M R Venkatesh, chartered accountant and lawyer, tells Rediff.com's Shobha Warrier in the second part of an eloquent interview.
We had seen what happened to many Asian countries when money moved from those countries. Why do you think India wants to depend on foreign money for growth then?
According to the finance minister, we are a $ 3 trillion economy which is around Rs 200 lakh crore.
30% of that is saved, which is Rs 60 lakh crore. But the fiscal savings is around Rs 25 lakh crore from which Rs 6 lakh crore goes to the central government to fund its deficit and another Rs 3 lakh to Rs 4 lakh crore goes to state governments to sustain their fiscal deficit.
So, you have only Rs 15 lakh crore as investable surplus.
The minister says they require Rs 100 lakh crore for infrastructure alone.
Obviously, there is a cash deficit.
So, they are going to borrow from abroad.
The government says it wants private investors to do the job...
The problem is, financial intermediation has virtually collapsed in this country.
We don't believe in balance sheets. Rating agencies have collapsed. Audit has become dysfunctional and balance sheets have become unreliable.
Unless you put these things in order, who is going to invest?
Only two balance sheets create any respect and they are of Reliance and Tatas.
They have manipulated every other balance sheet and you have not punished anybody.
There is no confidence in investment and investment is a function of confidence.
Unless that is restored, the virtuous cycle of investment, more consumption, exports will not happen.
So, you feel recapitalisation of Rs 70,000 crore will not give confidence to investors?
Which banker is going to lend if you are going to hang him for a bad decision?
The only lending banks do these days are housing and vehicle loans. They don't want to take risks.
Unless politicians understand that banking has embedded business risk and not all lending can come back safely, banks are not going to lend.
When banks don't lend, your investment cycle will not start.
They are talking about the PPP (Public-private partnership) model. Anybody who had signed a PPP has virtually signed a suicide note with the government.
So, PPP no way. Private investment, very, very, difficult.
That's why I want the government to invest. They should have kept the fiscal deficit at 5% instead of 3.4% so that they will have more money to invest.
Why is it that all the finance ministers are more bothered about the fiscal deficit number even at the cost of creating growth?
What happens is when they enter North Block, they are told to keep the fiscal deficit down. That's considered as success.
But if you reduce economic success to a single matrix, and try to define yourself through that, this is what happens -- you become a fiscal fundamentalist. I would call Nirmala Seetharamanji a fiscal fundamentalist.
Does that mean we will continue to grow below 6% like we had been in the last couple of years?
I would say, come what may, despite the government, we will grow at 6%. If we get a good monsoon, we will grow at 7% to 7.5% too.
We have learnt to grow despite the government and not because of the government.
The time has come for us to realise that the Government of India has very little to offer. Otherwise, we will go on brooding.
Do you feel budgetary exercises are becoming irrelevant?
Yes, Budgets are indeed becoming irrelevant.
If you look at this Budget, except for the Rs 2 increase in petrol and diesel, there is no positive or negative impact from the Budget for the common man. And this could have been done without the Budget also.
What were your first thoughts after the Budget presentation?
My first thought was no other finance minister in the world had to talk about both Chandrayan and toilets simultaneously. She was in an unenviable position.
They had a huge mandate which should have been used to take some giant steps like divestment, simplifying taxation, bringing MAT (Minimum Alternate Tax) tax as the main tax, a national irrigation plan, etc.
This is a Budget that talks about increasing the private investment model, but also increases taxes and thereby leaves little money in the hand of the rich to invest.
That's the paradox or the dichotomy of the Budget.
Illustration: Uttam Ghosh/Rediff.com