Budget 2012 not specific on fuel & fertiliser subsidies: Swaminathan Aiyar

In an interview with ET Now, Swaminathan Aiyar, consulting editor, ET Now, gives his views on his interaction with the Prime Minister and the Budget. Excerpts:


ET Now: What is your interpretation of your interaction with the Prime Minister?

Swaminathan Aiyar: If you listened to what the PM said, he agreed that it is necessary to increase fuel prices and fertiliser prices. He said we have to bring down the fiscal deficit. It is essential to reduce inflation. It may be tough, but we have to bite the bullet. For a PM who is usually very careful with his words, I found out that this was much clearer and much more aggressive than I had expected.

Very clearly it is not in the budget. Pranab Mukherjee has not highlighted it, but the PM has said it is going to happen in the months ahead. Now of course, that he has said it, it may not be the last word. There are some occasions where Mamata Banerjee has the last word. So, we are not entirely clear on what the outcome is going to be.

However, I will say if you look at what the budget says, it says we will provide in full for the food subsidy and other subsidies not more than 2%, say 1.9, but the two added together, therefore, can still be something like almost 3%. The budgeted subsidy for the current financial year was only 1.6% of GDP. We are now suddenly looking at 1.9% plus of food subsidy.

Frankly I do not see that we are being tough at all in the overall scheme of things. If you have not been tough overall, how are you going to bring the total fiscal deficit down to 5.1%? That is not clear to me at all. So we need a little more look in detail at the budgetary figures. Are these really credible or are we going to end up like last year coming to the conclusion that what is put down in print, it only bears a superficial resemblance to reality?

ET Now: You would be writing the lead story in the Economic Times tomorrow morning. What will the headline say?

Swaminathan Aiyar: The headline will say ‘don’t rock the boat budget, discipline yes, but we are kicking the can down the road’.

ET Now: You are playing it safe then, aren’t you?

Swaminathan Aiyar: I am saying this is a budget which claims to be attempting discipline, but the discipline has been kicked down the road. The budget itself is not very specific on being tough on the two big issues -- fuel subsidy and fertiliser subsidy.

In the interview with the PM after the budget, he finally said ‘look, we have to bite the bullet on this. We really have to bring both of those down’. At the end of it, he said ‘you are trying to get me into trouble. Aren’t you?’ I said, ‘well, the trouble won’t come from me, it will come from Kolkata’. So we have a situation where the PM has spoken, but as we have seen sometimes it is Mamata Banerjee who has the last word.

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