FM focus is on pro-capital market measures: S Narayan

A day before the Budget, Finance Minister P Chidambaram will table the Economic Survey 2013-14 in Parliament on Wednesday. S Narayan, former finance secretary says he sees the fiscal deficit projection for FY14 at 4.8 percent. He also expects the finance minister to focus on pro-capital market measures in the Budget tomorrow, also that a surcharge is likely on high income tax brackets.

He says that we need incentives for the manufacturing sector in the Budget, and that he does not expect a hike in excise & service tax rates. He expects government borrowing in FY14 at Rs 5.8-5.9 lakh crore, and that the Food Security Bill is a potential negative if implemented in this Budget.

Below is an excerpt from the interview. 

Q: A word on which way you think the finance minister (FM) will lean between the urgency to do something right now for growth versus the fiscal prudent situation.

A: I think the FM will be bringing out a very mature Budget because he knows that down the road, with the elections looming he may have to give some concessions may be a little later. However, I think he will focus on ensuring that the fiscal deficit gets down to the kind of number that he has been talking about, which is 4.8 percent in the next year. He would make sure that there are some incentives.

I think there would be lot in it for the capital markets, as he wants to make sure that there is a lot of activity in the market. He wants to make sure that more Foreign Institutional Investor (FII) investments come into the market, and there are opportunities for more initial public offerings (IPOs). So I see a lot of activity which is pro-capital market coming in.  However, he will focus on fiscal prudence and perhaps a little bit of taxation on the higher side. Maybe not changing the tax rates but looking at some kind of a surcharge on the wealthy, something like that, some concessions for the poor. I think this is the kind of package that he would probably unveil tomorrow.